Morgan Stanley forecasts 15.3% CAGR in Indian infrastructure investments over next five years

Investment banking company Morgan Stanley has anticipated a 15.3 per cent compound annual growth rate (CAGR) in infrastructure investments, which is projected to result in a cumulative expenditure of $1.45 trillion in India over the next five years.

This surge in investment is expected to significantly boost the investment rate, fostering a prolonged period of high productive growth, the global investment company said in its recent report, The New India - Infrastructure.

"Infrastructure investment is the backbone of any economy - and India has not only increased its investments on infrastructure in the last decade but also has worked on improving their productivity. 

Nonetheless, there is still much headroom for increasing both size and productivity - and recent government policies have been a step in the right direction. 

From the investment perspective, we expect a 15.3 per cent CAGR in infrastructure investments," Morgan Stanley added.

It further added that Prime Minister Gati Shakti, also known as National Master Plan for Multi-modal Connectivity is poised to accelerate the execution of infrastructure projects while curbing cost overruns. 

It will unlock the productivity gains and enhance efficiency, the global brokerage said.

"Regarding productivity improvement, we see the well-orchestrated and centralised approach under PM Gati Shakti driving faster execution of infrastructure projects while reducing cost overruns. It should also unleash productivity gains, leading to higher efficiency," it added in the report.

The global brokerage said this growth in infrastructure spending will have four key macroeconomic implications: a profit boom driven by increased capital expenditures (capex), enhanced macroeconomic stability, improved efficiency and productivity, and more sustained growth.

Recognising the effect of infrastructure growth on the market, the report added that there will be positive impacts on the equity market benefiting enablers, developers (or asset owners), and adopters.

The global brokerage anticipated infrastructure investment to increase from 5.3 per cent of GDP in financial year (FY) 2024 to 6.5 per cent of GDP by FY 2029.