India will become the world's third-largest economy by 2028, with its GDP expected to grow more than two-fold and hit $10.6 trillion by 2035, as per a report by Morgan Stanley issued on Wednesday.
The financial behemoth pointed out that this growth path is likely to be substantially fueled by four to five Indian states—Maharashtra, Tamil Nadu, Gujarat, Uttar Pradesh, and Karnataka—each likely to be an economic size of about $1 trillion. These states would be among the top 20 economies in the world by 2030-2035.
"On the basis of the latest statistics, the top three are Maharashtra, Gujarat and Telangana. The states which have improved substantially in ranks during the last five years are Chhattisgarh, Uttar Pradesh and Madhya Pradesh," the report added.
India is estimated to contribute roughly 20% of world economic growth over the next ten years, rising sharply as a part of multinational corporate earnings.
"To achieve this, among other reasons, the contribution of India's 28 states and eight Union Territories is essential. States not only have a vital role in fiscal affairs but also compete to attract investments by framing appropriate policies and incentives, simplifying business conditions (finally, a business or factory is established in a given state)," stated economists from the international financial institution.
The report underscored that the autonomous character of state politics and different policy priorities could either promote or constrain growth. The Indian states, with the authority to control major resources, will therefore be pivotal in creating the economic future of the country.
"The success of India's competitive federalism will determine if she is to become a factory to the world, doubling her per capita income over the next seven years – and if the stock market can maintain its strong run," the report added.
As India advances toward becoming a $10.6 trillion economy, the influence of state governments—both political and legislative—will be a crucial factor. Their policy choices can significantly impact India’s emergence as a global manufacturing powerhouse.
In the past decade, there has been intense emphasis placed on the development of physical infrastructure. Central government capital spending has increased from 1.6% of GDP in FY2015 to 3.2% in FY2025, pushing development in states.
"Roads increased by 60 per cent, airports were doubled and metro network was quadrupled. Central government-led infrastructure programmes like PM Gati Shakti, the National Infrastructure Pipeline, Bharatmala, Sagar Mala, and UDAN have been enacted in addition to state-specific plans," stated the report.
Cooperation between the Centre and the states continues to be key, particularly in implementing large-scale infrastructure projects. Besides, state governments take the lead in sectors such as power, water, and urban development, the report concluded.
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