India to Become World’s 3rd Largest Economy by 2028, GDP to Hit $5.7 Trillion: Morgan Stanley
India is set to become the world’s third-largest economy by 2028, surpassing Germany, with its GDP projected to grow from $3.5 trillion in 2023 to $4.7 trillion in 2026 and $5.7 trillion in 2028, according to Morgan Stanley. India’s share of global GDP is expected to rise from 3.5% to 4.5% by 2029. By 2035, the economy could reach $6.6 trillion under a bearish scenario, $8.8 trillion under a base case, and $10.3 trillion in an optimistic outlook. GDP per capita is projected to increase from $2,514 in 2025 to between $4,247 and $6,706, depending on the growth trajectory.
Key drivers of this expansion include strong population growth, macroeconomic stability, improved infrastructure, and a thriving entrepreneurial sector. India is expected to emerge as a major consumer market and manufacturing hub. Inflation is predicted to moderate, with CPI expected at 4.3% in FY26-27, while the Reserve Bank of India continues its rate-cutting cycle, with another 25 bps cut anticipated in April. Government policies aim to support economic expansion through tax cuts and capital expenditure while maintaining fiscal discipline. However, external risks such as US trade policies, global recession fears, and currency fluctuations could impact growth, and India’s stock market may face volatility in 2025 due to global economic conditions.
India to Become World’s 3rd Largest Economy by 2028, GDP to Hit $5.7 Trillion: Morgan Stanley
According to a recent analysis by Morgan Stanley, India is poised to become the world’s third-largest economy by 2028, with its gross domestic product (GDP) projected to reach $5.7 trillion. Currently valued at $3.5 trillion in 2023, the nation’s economy is expected to expand to $4.7 trillion by 2026, surpassing Germany within the next five years. This trajectory places India behind only the United States and China in global economic rankings. The shift reflects not only India’s rapid growth but also its increasing influence on the global stage, with its share of global GDP projected to rise from 3.5% to 4.5% by 2029.
Long-Term Growth Scenarios
Morgan Stanley outlines three possible economic trajectories for India by 2035. Under a conservative scenario, GDP could reach $6.6 trillion. The base case, reflecting current trends and policy continuity, projects an $8.8 trillion economy. In an optimistic scenario, characterized by accelerated reforms and favorable global conditions, India’s GDP might surge to $10.3 trillion. Parallel to this expansion, per capita income—a key indicator of living standards—is expected to rise significantly. Starting at $2,514 in 2025, it could climb to between $4,247 and $6,706 by 2035, depending on the growth path. This trend underscores the potential for improved quality of life and greater economic opportunities for India’s vast population.
Drivers of Economic Expansion
Several factors are fueling India’s growth. A young and expanding workforce provides a strong foundation for sustained economic activity. Political stability and a democratic framework have fostered a favorable environment for policy implementation and foreign investment. Infrastructure development—particularly in transportation, digital networks, and energy—has enhanced connectivity and productivity. Additionally, a thriving entrepreneurial ecosystem, driven by startups and private enterprises, is fueling innovation in sectors such as technology, renewable energy, and financial services.
Macroeconomic stability and proactive government policies also play a crucial role. Measures aimed at boosting domestic consumption—such as tax reforms, rural development initiatives, and social welfare programs—are expected to stimulate demand. Fiscal strategies that balance capital expenditure with deficit reduction demonstrate a commitment to long-term financial stability. For instance, recent income tax revisions and increased public spending on infrastructure are designed to spur growth while maintaining fiscal discipline.
Inflation and Monetary Policy
Morgan Stanley anticipates a gradual easing of inflationary pressures, with consumer price index (CPI) inflation projected to decline from 4.9% in FY2025 to 4.3% in FY2026–27. This moderation is attributed to stabilizing commodity prices, improved supply chains, and effective monetary interventions. The Reserve Bank of India (RBI) has initiated a rate-cutting cycle to support growth, with another 25-basis-point reduction expected in April 2024. These measures aim to lower borrowing costs, incentivize private investment, and sustain economic momentum.
Risks and External Challenges
Despite optimistic projections, India’s economic outlook faces external headwinds. Global trade dynamics, particularly protectionist policies and geopolitical tensions, could impact export-oriented sectors. U.S. monetary policy remains a critical factor, as aggressive rate hikes by the Federal Reserve could trigger capital outflows and currency volatility. Additionally, a potential global recession in 2025 poses risks to India’s growth, potentially dampening investor sentiment and stock market performance. Domestic vulnerabilities, such as poor monsoons affecting agricultural output or energy price shocks, also require close monitoring.
Conclusion
India’s economic trajectory is one of transformative potential, driven by demographic dividends, institutional resilience, and strategic reforms. While the path to becoming a $10 trillion economy depends on both domestic policy effectiveness and global conditions, India’s progress highlights its growing role as a key driver of global growth. Successfully navigating external uncertainties while maintaining macroeconomic stability will be crucial in realizing this vision, positioning India not just as an economic powerhouse but as a model for inclusive and sustainable development.
