New Delhi, May 04: Amid global concerns over oil price volatility and geopolitical tensions in the Middle East, Morgan Stanley has taken a bullish stance on India, viewing the current turbulence as a catalyst for long-term investment growth.
In its latest report, the brokerage raised its investment cycle outlook, projecting India’s investment-to-GDP ratio to reach 37.5% by FY30, up from its earlier estimate of 36.5%. This revision implies an additional $800 billion in cumulative capital expenditure over the next five years.
A majority of this incremental investment—nearly 60%—is expected to be directed towards high-growth sectors such as energy, data centres, and defence. The firm believes this capex surge will significantly boost corporate profitability, with earnings growth projected at over 15% CAGR, potentially driving equity markets to around 10 times FY31 earnings.
The investment push is underpinned by vulnerabilities exposed by the Middle East conflict, particularly India’s dependence on imported energy and critical inputs. Policymakers are responding with a sharper focus on self-reliance and supply chain resilience.
In the energy sector, where India imports nearly 85% of crude oil and about half of its natural gas needs, efforts are underway to expand strategic reserves, increase domestic coal output and gasification, accelerate renewable capacity, and advance nuclear energy projects.
In fertilisers, the government is working to reduce reliance on imports such as DAP and MOP by boosting domestic urea production, diversifying sourcing, and promoting efficient nutrient usage to manage subsidy burdens.
Defence spending is also expected to rise structurally, with plans to increase outlay from around 2% to 2.5% of GDP by FY31, alongside a push for indigenisation and higher private sector participation.
Meanwhile, the data centre sector is emerging as a key growth driver. Backed by data localisation policies and global diversification trends, India’s data centre capacity is projected to expand sharply from 1.8 GW to 10.5 GW by FY31, reinforcing its position in the digital infrastructure space.
