States, UTs crucial to India's rise as world’s third-largest economy by 2028: Morgan Stanley

New Delhi: Morgan Stanley said states and union territories will play a crucial role in India's transformation of becoming the world's third-largest economy by 2028 and reach a gross domestic product (GDP) of $10.6 trillion by 2035.

"Their policy frameworks are capable of influencing India's rise as a global manufacturing hub," according to the report titled Building Block of India's Prosperity.

The forecast of $10.6 trillion considers the likelihood of Maharashtra, Tamil Nadu, Gujarat, Uttar Pradesh, and Karnataka achieving an economic size of around $1 trillion between 2030 and 2035.


The report highlights that nine out of 18 major states have a per capita GDP above the all-India average of $2,547. These include Andhra Pradesh, Gujarat, Haryana, Karnataka, Kerala, Maharashtra, Punjab, Tamil Nadu, and Telangana. In terms of growth, four states - Assam, Gujarat, Karnataka, and Odisha - have recorded a five-year real GDP compound annual growth rate (CAGR) higher than the national average of 6.1%. Seven states, including Assam, Bihar, Odisha, and Uttar Pradesh, have capital expenditure as a percentage of GDP above the national average of 3.2%.

However, the report also noted key challenges that vary across states. These include geographical and natural advantage/disadvantage, governance issues, capacity constraints, policy implementation, fiscal capacity and debt burden, financial autonomy, and infrastructure deficits and disparities.