India will become third largest economy by 2027, leaving behind Japan, Germany: Jefferies

Jefferies said it would be “impossible” for big global investors to ignore the country

New Delhi:

India’s GDP is likely to reach $5 trillion over the next four years and become the third-largest economy by 2027, surpassing Japan and Germany, Jefferies said on Wednesday.

In a note, the investment banking company said India will become an almost $10 trillion market by 2030 and it will be “impossible” for large global investors to ignore the country.

“From the 9th largest economy a decade ago, India has now become the 5th largest economy with a nominal GDP of $3.4 trillion. On a PPP basis, the GDP is already much higher at $13.2 trillion, making it the world’s 3rd “has become the largest economy,” Jefferies said.

It said India’s GDP grew despite the impact of several major reforms such as the bankruptcy law, GST implementation, Real Estate Regulation Act (RERA) and demonetization.

It said these reforms were “good” in the long term but had an “adverse impact” on growth in the near term.

“Not only is India projected to grow at 6% over the next five years, but the country will also be a leader in a world where most large economies are expected to see a decline in growth rates.

“We believe that accelerating growth, especially relative to the developed world, will help India rapidly rise to third in the world GDP ranking before the end of this decade,” Jefferies said.

India’s market cap will reach $10 trillion by 2030

Jefferies said it believes Indian equity markets will continue to deliver 8%-10% dollar returns over the next five to seven years.

“Structural domestic inflows arising from shifting of savings to equities and potential listing of large unicorns in India could push the market cap to $10 trillion by 2030,” the company said.

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“Even though India is the fifth largest in terms of market cap, its ranking in the Bloomberg World Index is only eighth with a weighting of 2.0%, which means that in our view, it is the fastest growing investment destination for foreign investors. There is tremendous scope for developing countries in the world,” it added.

Jefferies said increasing the country’s weighting in global funds could make Indian stocks desirable to a more diverse group of equity investors.