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India digitization could boost economy by trillions: Morgan Stanley


A sign informs customers they can pay using digital payment methods outside a clothing store in Bengaluru, India, on Feb. 4, 2017.

Dhiraj Singh | Bloomberg | Getty Images

A sign informs customers they can pay using digital payment methods outside a clothing store in Bengaluru, India, on Feb. 4, 2017.

“Our view is that that creates employment opportunities, that increases GDP per year by about 50 to 75 basis points, so GDP growth [on a] real basis is 7.1 percent, nominal is around 11 percent. That means economy and markets can do very well,” he added.

Morgan Stanley forecasts India’s GDP to reach $6 trillion in 2027 as a result of its digitization drive. That would make India the third-largest economy in the world, behind the U.S. and China, which recorded $18.5 trillion and $11.2 trillion in GDP, respectively, last year.

Digitization also paves the ways for the country’s equity market to become one of the world’s five largest, with a market capitalization of $6.1 trillion.

The bank isn’t the only one optimistic about the impact of Modi’s reforms on the country either.

India’s sovereign rating was upgraded by Moody’s Investors Service for the first time in 14 years to Baa2 from Baa3 on Friday. “The decision to upgrade the ratings is underpinned by Moody’s expectation that continued progress on economic and institutional reforms will, over time, enhance India’s high growth potential,” Moody’s said.

The rating agency highlighted the new Goods and Services Tax as a measure that will “promote productivity,” and it noted that the Aadhaar system and demonetization helped to “reduce informality in the economy.”

Nevertheless, Agarwal acknowledged that it could take some time for those in India’s massive informal economy to adopt digitization.

“It will take some time because it is a material change in habits, material change of business model … but I think over the next 12 to 18 months, by fiscal 2019 or early 2020, I think you’ll start seeing those changes,” he said.

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