India Set to Become the World’s Third-Largest Economy by 2028: Morgan Stanley Report

India is poised to climb to the third position among the world’s largest economies by 2028, surpassing developed nations like Germany and Japan, according to a comprehensive report by Morgan Stanley released on Wednesday.

The report projects that India’s gross domestic product (GDP) will more than double to $10.6 trillion by 2035, cementing its position as a global economic powerhouse.

India’s States Powering the Economic Engine

Top States Nearing $1 Trillion Milestone

Morgan Stanley's report highlights the growing economic clout of Indian states. It estimates that three to five Indian states — including Maharashtra, Tamil Nadu, Gujarat, Uttar Pradesh, and Karnataka — could each approach the $1 trillion mark, positioning them among the top 20 global economies by 2035.

“Based on the latest data, the top three states are Maharashtra, Gujarat, and Telangana,” the report noted.

The states of Chhattisgarh, Uttar Pradesh, and Madhya Pradesh have seen significant improvements in their rankings over the past five years, reflecting their rising economic importance.

Driving Global Growth and Business Profits

India's Role in Global Economy

India is projected to contribute around 20% of global economic growth over the coming decade. This impressive performance will make the country a crucial market for multinational companies seeking revenue growth.

“States not only manage their own finances but also compete for investments by designing policies and easing business conditions. Ultimately, every factory or business is set up in a specific state,” the report said.

This emphasizes the need to focus not just on national-level policies but also on state-level dynamics to understand India’s growth trajectory.

Infrastructure Boom and Policy Reforms

Surge in Infrastructure Investment

The past decade has seen a transformative shift in infrastructure development:

• Centre’s capital expenditure has doubled from 1.6% of GDP in FY15 to 3.2% in FY25

• Highway networks have expanded by 60%

• Number of operational airports has doubled

• Metro rail systems have quadrupled

These improvements have laid the groundwork for India’s industrial growth and urban development.

Major Infrastructure Initiatives Fueling Growth

Several flagship schemes have accelerated this momentum:

• PM Gati Shakti

• National Infrastructure Pipeline

• Bharatmala

• Sagarmala

• UDAN

These central initiatives, combined with state-level infrastructure programs, have catalyzed India's logistics and urban transformation.

Competitive Federalism: A Catalyst for Growth

The Role of States in Economic Development

Morgan Stanley emphasized the role of competitive federalism, wherein states shape their industrial policies, attract foreign and domestic investment, and manage regional development priorities.

“The success of India’s ‘competitive federalism’ will determine whether the country can become a global manufacturing hub, double per capita income within seven years, and sustain the momentum in capital markets,” the report added.

This decentralized yet coordinated governance model is proving vital for inclusive and sustainable economic growth.

Centre-State Collaboration Critical to Success

Strategic Synergy Required

“The Centre and states must continue to collaborate closely to meet India’s economic ambitions,” Morgan Stanley concluded.

This collaboration is especially crucial for implementing complex policy reforms, improving ease of doing business, and attracting global capital.

Conclusion

India’s economic journey over the next decade will be shaped not only by macroeconomic fundamentals but also by the dynamism and vision of individual states. With ambitious infrastructure projects, policy reforms, and increasing global investment, India is well-positioned to realize its goal of becoming the third-largest economy by 2028 and a $10.6 trillion economy by 2035. Morgan Stanley’s report underlines the pivotal role of states as key economic actors, and their ability to transform India into a global growth engine of the 21st century.