India’s economy to be third largest by 2028, to hit $10.6 trillion by 2035, says Morgan Stanley

Top three States, according to the report, are Maharashtra, Gujarat and Telangana; States showing significant improvement in ranks over the past five years are Chhattisgarh, Uttar Pradesh and Madhya Pradesh

New Delhi: A Morgan Stanley report on Wednesday said it expects India’s economy to be the third largest globally by 2028 and more than double in size to $10.6 trillion by 2035.

Embedded in this forecast is the likelihood that three to five States (Maharashtra, Tamil Nadu, Gujarat, Uttar Pradesh and Karnataka) will have an economy of nearly $1 trillion each, ranking in the top 20 global economies between 2030 and 2035, the report projected.

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“Based on the latest data, the top three States are Maharashtra, Gujarat and Telangana. The States showing significant improvement in ranks over the past five years are Chhattisgarh, Uttar Pradesh and Madhya Pradesh,” the report noted.

India will drive a fifth of global growth in the coming decade and become essential to earnings growth for many multinational companies.

“To secure this outcome, among other things, the role of India’s 28 States and eight Union Territories is critical. States not only play a pivotal role in fiscal management but also compete for investments by creating suitable policies and incentives, easing business conditions (ultimately, a business or factory is set up in a particular state),” said economists from the global financial institution.

They have independent political cycles with varying mandates that can affect growth positively or negatively and are empowered by law to control factors of production.

“The success of India’s competitive federalism will help decide whether she becomes a factory to the world, doubling her per capita income in the coming seven years – and whether the stock market continues its strong performance,” the report emphasised.

States are economically important as India becomes a $10.6 trillion economy by 2035, wielding considerable political and legislative power. Their policy frameworks are capable of influencing India’s rise as a global manufacturing hub.

In the past decade, there has been a concerted push for development of physical infrastructure – the Central government doubled its capex to 3.2 per cent of GDP in FY2025 from 1.6 per cent of GDP in FY2015. This has led to significant infrastructure growth across states.

“Highways rose 60 per cent, airports doubled, and metro network quadrupled. Infrastructure programmes spearheaded by the Central government — such as PM Gati Shakti, the National Infrastructure Pipeline, Bharatmala, Sagar Mala, and UDAN — have been promulgated alongside state-specific initiatives,” said the report.

States collaborate with the Centre on these projects and play a crucial role in planning and implementation. Further, state governments are also responsible for investments in areas related to power, water, and urban development, it mentioned.