The research by Morgan Stanley said over the past two and half decades, India's GDP has risen 11-fold, and the equity market cap has risen 30 times. In 1993, when foreign portfolio investors were first allowed to buy Indian stocks, India's GDP and market cap stood at $260 billion and $90 billion, respectively.

Since then FPIs have bought a cumulative $217 billion In the 27 years since then, India's GDP has risen 11-fold to $2,870 billion, an average annual real growth rate of 6.5 percent. The country's equity market capitalization has increased by over 13 percent annually to $2.7 trillion. The MSCI India index has outperformed the MSCI Emerging Market index by a factor of 2.

"If our growth projections were to come to fruition, India's economy would pass the $6.4 trillion mark by 2030, with per capita income at $4,279 reaching the upper-middle-income country threshold. This implies real GDP growth of 6 percent and nominal growth of 10-10.5 percent," Morgan Stanley said.

A key ingredient to the forecast is our estimate that manufacturing as a share of GDP will rise from approximately 15 percent of GDP currently to 20 percent by F2030, implying that its goes from $400 billion to $1,175 billion.

The note said that the thrust toward a manufacturing-led growth will set in motion the virtuous cycle of productive growth of higher investment – job creation – income growth – higher saving – higher investment and India would be one of the few large economies offering high nominal productive growth.

"The stars appear aligned for a new profit cycle. For an economy that is likely to grow at a nominal rate of 10 percent per annum, if the profit share in GDP hits its long term average of 3.5 percent over the next five years from its all-time low current level, it gives us an annual compounded growth in earnings of 23 percent for the broad market," Morgan Stanley said.

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Morgan Stanley said by 2030, India's market capitalization could grow to $6.4 trillion in line with GDP growth, an annual increase of 10 percent. With accelerating earnings and reasonable relative valuations, trailing under-performance in the past five years and strong policy traction, India seems set to beat EM equity returns in the ensuing five years.

"To be sure, the journey toward a $6 trillion GDP and market cap is not without its challenges and risks. We see risks to our base case from the global growth environment, and delivery and execution of policy reforms required to support the medium-term growth trajectory," it added.(IANS/JC)