India is set to become the third largest economy and stock market in the world by the end of the decade, according to U.S. banking group Morgan Stanley, with GDP forecast to surpass $7.5 trillion by 2031, over twice the current level.

“India is gaining power in the world economy, and in our opinion, these idiosyncratic changes imply a once-in-a-generation shift and an opportunity for investors and companies,” Morgan Stanley stated in a report.

The number of households in India earning over $35,000 a year will likely increase fivefold within the coming decade to exceed 25 million. “The implications are that GDP is likely to cross $7.5 trillion by 2031, more than double the current level, a discretionary consumption boom and 11% annual compounding of market capitalisation to $ 10 trillion in the coming decade,” Morgan Stanley added.

“Implications include a rise in credit to GDP from 57% to 100%, better healthcare services, greater insurance penetration, a quintupling of stock market investors from 62 million (up from 20 million three years ago) to around 300 million, potentially leading to a continuation of the persistent bid on stocks and a material rise in consumer discretionary spend,” it said. 

In addition, India is set to become the factory to the world, according to the Morgan Stanley report, as corporate tax cuts, investment incentives and infrastructure spending boost capital investments in manufacturing.

“Multinationals are now buoyant about the prospects of investing in India, and the government is helping their cause by investing in infrastructure as well as supplying land for building factories,” said Upasana Chachra, Chief India Economist at Morgan Stanley.

The report shows that multinational corporations’ sentiment in regard to India’s investment outlook is at a record high. Manufacturing’s share of GDP in the country could rise from the current level of 15.6% to 21% by 2031.