Morgan Stanley, a prominent global brokerage, highlights India's advantageous demographic landscape, contrasting it with the shrinking working-age populations and tight labor markets experienced by many large economies. According to United Nations projections, India's working-age populace is anticipated to expand until 2037, with a decline in age dependency expected until 2032. Remarkably, India is poised to contribute 21 percent to the incremental surge in the global working-age population over the next decade.
Foreseeing the trajectory of India's economy over the next decade, Morgan Stanley emphasizes the pivotal role of manufacturing, exports, and capital expenditure (capex) in driving growth and employment generation. This outlook aligns with recent policy reforms aimed at reshaping India's growth paradigm, prioritizing capex and manufacturing-led strategies.
Acknowledging the current state of India's labor force, Morgan Stanley underscores the prevalence of informality, with a staggering 89.1 percent engaged in the informal sector—a figure that surpasses other major economies. Agriculture remains the dominant sector, employing 45.8 percent of the workforce.
Despite improvements in labor productivity over time, India faces challenges, including relatively low wage growth in the manufacturing sector compared to regional counterparts and weaker labor productivity compared to most emerging markets (EMs). However, as the economy progresses towards formalization and the share of manufacturing and services in the labor force expands, Morgan Stanley anticipates a substantial enhancement in labor productivity in the coming years. This shift promises to fortify India's growth prospects and bolster its competitiveness on the global stage.
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