India’s unstoppable rise: Poised to become Asia’s largest economy with robust growth, digital innovation, and global investment.

India’s growth story has been one of a compelling rise, from that of a developing country to an economic giant of the world. With robust macroeconomic stability, better infrastructure, and a successful entrepreneurial ecosystem, India is already poised to become the largest economy in Asia. Morgan Stanley estimates that India will be the world’s third-largest economy by 2028, overtaking Germany and emerging as the undisputed leader in world trade and commerce.
The growth path is fueled by a number of central drivers such as growing consumption, a burgeoning manufacturing economy, and more foreign investment. While China is struggling with economic headwinds, India has become Asia’s most desirable consumer and investment destination. Let us understand the moving forces of India’s ascension and why India is ready to become the economic leader in Asia’s pecking order.

India’s Economic Growth: A Rapid Ascent

India’s economic evolution has been nothing less than phenomenal. In 1990, India was the 12th largest economy in the world. In 2023, it rose to the 5th spot, overtaking the United Kingdom. With an estimated GDP of $5.7 trillion by 2028, India is set to surpass Germany and emerge as the third-largest economy on the planet, behind only the United States and China.
This expansion is not accidental but due to the fundamental policy reforms, improvement of infrastructure, and increased consumer base. The GDP of the country grew from $3.5 trillion in 2023 to an estimated $4.7 trillion by 2026, reflecting strong economic momentum. In addition, India’s contribution to world GDP is also anticipated to increase from 3.5% to 4.5% by 2029, reaffirming its significance in the global economy.

Driving Factors Behind India’s Economic Boom

1. Supportive Demographics and Increasing Consumption
India has a population of more than 1.4 billion, with a young and fast-growing workforce. Over 65% of its population is below the age of 35, and this forms a huge labor force and strong consumer group. As their incomes increase, India is to be the world’s most coveted consumer marketplace and will lead demand in sectors like retail, technology, and automobiles.
Urbanization too is gaining pace, resulting in increased expenditure on housing, infrastructure, and consumer durables. The government’s efforts to promote financial inclusion and digital payments have also added strength to domestic consumption, making it a pillar of economic growth.

2. Strong Macroeconomic Stability and Policy Reforms
India’s macroeconomic foundations are robust, instilling investor and business confidence. Inflation has softened to approximately 4%, and there is price stability. The Reserve Bank of India (RBI) has followed an even-handed monetary policy, with reduction in interest rates spurring growth while staying within fiscal prudence.
Policy-wise, the government has enforced key reforms, such as Goods and Services Tax (GST), Make in India Initiative, Production-Linked Incentive (PLI) Scheme and Digital India Campaign. These policy initiatives have built a robust foundation for continued economic growth, making India’s ascension to become the largest economy in Asia.

3. Manufacturing and Infrastructure Development
India is undergoing a transformation in its manufacturing sector with more Foreign Direct Investment (FDI) pouring in for major sectors like Electronics, Automobiles, and Drugs. The government’s focus on Infrastructure Development – roads, railways, and smart cities – is also boosting economic productivity.
Morgan Stanley also points out that India’s Manufacturing base is increasing its share in GDP, with foreign companies such as Apple, Tesla, and Samsung making more investments. The shift towards a manufacturing-based economy from a service-based one will help accelerate India’s growth and make it less dependent on imports.

4. India’s Digital Revolution and Technological Advantages
India is at the forefront of the digital revolution, driving innovation in fintech, e-commerce, and artificial intelligence. With over 800 million internet users and the world’s largest digital payment ecosystem, the country has embraced technology at an unprecedented scale. One of the most transformative developments is the Unified Payments Interface (UPI), the world’s largest real-time payment system, revolutionizing transactions and financial accessibility. Additionally, India’s startup ecosystem is thriving, with over 100 unicorns fueling innovation and job creation. Investments in AI and automation are further enhancing productivity and efficiency across industries. This rapid digital adoption is expected to significantly boost GDP growth, positioning India as a global leader in the digital economy.

India vs. China: The Economic Shift in Asia

China has been Asia’s economic powerhouse for decades, but recent setbacks like slowing growth, excessive debt, and demographics have raised questions about the future. On the other hand, India is unfolding as a more stable and dynamic growth narrative. India’s demographic advantage is one of its strongest assets, with a young working-age population, whereas China is confronted with an aging population and shrinking birth rates.
Economically, India’s GDP is growing in a stable macro environment, while China is slowing down due to structural problems. India is drawing growing foreign direct investment (FDI) and becoming a global hub in manufacturing, while China is seeing weakening global investment interest in manufacturing. India’s technology sector is also growing with a vibrant startup ecosystem and digital payment revolution, while China’s regulatory problems have hindered the growth of the tech sector.
Geopolitically, India has established powerful international alliances and diversified trading partners, while China has increasing trade tensions with large economies. With these dynamics at work, India is poised to become the center of Asia, positioning itself as an attractive destination for trade and investment.

India’s Long-Term Economic Outlook

Morgan Stanley foresees three growth scenarios for India in 2035 based on different trajectories of the country’s economic growth.
India’s GDP is forecast to stand at $6.6 trillion under the Bear Case, denoting moderate growth.
In the Base Case, GDP growth is projected to reach $8.8 trillion, establishing India as a leading world economy.
In the best Bull Case scenario, GDP would jump to $10.3 trillion, propelling India into the league of economic superpowers.
Accompanying this growth, India’s per capita income is expected to increase dramatically, from $2,514 in 2025 to a maximum of $6,706 in 2035, reflecting a sharp rise in living standards and economic well-being.

A Thriving Stock Market Reflects Investor Confidence in India’s Long-Term Potential

Ridham Desai, Morgan Stanley’s Chief Equity Strategist, argues that India’s equity market is poised for long-term appreciation with strong underlying fundamentals and good economic conditions. The firm expects a “Stock Pickers’ Market,” where specific sectors like Financials, Consumer Discretionary, and Industrials will outperform, and there will be rich opportunities for investors. This change means that market performance will be more about sector-specific growth than overall macroeconomic trends.
These market valuations in India are at their most attractive levels since the COVID-19 pandemic, and thus India becomes a great investment destination for investors wanting stability, showing resilience, and with long-term growth potential. With the growth in consumer demand, investments into the private sector and a robust policy framework, India is emerging as a key play in the investment landscape of the world.
In addition, sustained enhancement of infrastructure, technology innovation, and manufacturing will be driving the upward movement of Indian equities further establishing it as one of the most appealing markets for long-term capital growth.

Conclusion: India’s Inevitable Rise as Asia’s Economic Giant

The economic path of India indicates that it is not only an emerging star but an emerging global leader. With robust macroeconomic stability, policy-led growth, a young population, and technological innovation, India is set to overtake its Asian peers and be the largest economy in Asia within the next few decades.
While global investors and firms look for new prospects, India’s resilience, innovation, and strategic reform are the most promising market of the 21st century. Based on the prevailing growth momentum, India won’t just be Asia’s economic powerhouse but become one of the global economic dominant forces. To sustain this momentum, India must address challenges like income inequality and infrastructure gaps.