Jefferies stated on Wednesday that India's GDP is poised to reach $5 trillion within the next four years and will overtake Japan and Germany to become the 3rd largest economy by 2027.

In a note, the investment banking company emphasized that India will become nearly a $10 trillion market by 2030, asserting that it will be "impossible" for large global investors to ignore the country.

"From the ninth largest economy a decade back, India has now become the 5th largest economy with a nominal GDP of $3.4 trillion. On a PPP basis, the GDP is already much higher at $13.2 trillion, making it the third largest economy in the world," Jefferies said. It noted that India's GDP continued to grow despite the impact of several major reforms like the bankruptcy law, GST implementation, Real Estate Regulation Act (RERA), and demonetization.

These reforms were described as "good" for the long-term but "adversely impacted" near-term growth, according to Jefferies.

"India is not only projected to grow at 6% over the next five years, the country will also be a standout in a world where most large economies are expected to see their growth rates decline.

3rd largest economy
Image: Prag News

"We believe that rising growth outperformance, particularly against the developed world, should help India climb up the world's GDP ranks quickly to the third spot before this decade ends," Jefferies said.

Regarding India's market cap, Jefferies expressed belief that Indian equity markets will continue to deliver 8%-10% dollar returns over the next five to seven years.

"Structural domestic flows arising from shift of savings to equities and potential listing of large unicorn in India can drive the market cap past $10 trillion by 2030," the company said. Jefferies added that, "Even though India is fifth largest in terms of market cap, its ranking in the Bloomberg World Index is eighth with a weight of just 2.0% which, in our view, means there is tremendous scope for foreign investors to increase investment into the fastest growing country in the world."

"A rise in country weight in a global fund could make Indian stocks a must-have for a much more diverse set of equity investors," Jefferies concluded.

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