India can’t achieve China’s past 8-10% growth, Morgan Stanley says

India is not likely to achieve 8%-10% economic growth rates that China had over the long term, Morgan Stanley’s chief Asia economist said. Chetan Ahya told Bloomberg that India’s economy will likely grow steadily at 6.5%-7% over the long term but it is not going to replace China as a global manufacturing hub. This comes as official figures showed China’s growth averaging 10% a year in the three decades after its economic reforms in 1978.
Economic progress in India is hindered by a lack of infrastructure and a low skilled workforce, Chetan Ahya said, adding, “Both these constraints make us believe that India’s growth is going to be strong, but at 6.5%-7% rather than 8%-10%.”
The investment bank said that it remains optimistic about India’s prospect as in a recent report it said that the current expansion of the country’s economy resembles that of the mid-2000s boom, fueled by rising investment. As per Morgan Stanley’s report ‘The Viewpoint: India – Why this feels like 2003-07’. Morgan Stanley said that after a decade of investment to GDP steadily declining, capex emerged as a key growth driver in India as “the capex cycle has more room to run, therefore the current expansion closely resembles that of 2003-07.”
It added, “However, the initial pick-up in private consumption growth was more modest, averaging just 4.8 per cent in 2003-04,” it said. In the cycle, real GFCF growth is holding strong at 10.5 per cent in October-December, staying above pre-Covid 2017-18 average of 9.6 per cent, it noted, explaining, “This has been mainly driven by public capex so far, as the corporate sector has been working through multiple shocks from previous years that have weighed on its ability to invest.”