Morgan Stanley Sees India's Manufacturing Output Tripling To $1.5 Trn By 2035

Morgan Stanley has raised its long-term outlook for India's manufacturing sector, projecting factory output to nearly triple to $1.5 trillion by 2035 as government incentives, the global shift in supply chains away from China and a growing working-age population drive industrial expansion.

The brokerage expects manufacturing's share of India's gross domestic product (GDP) to rise to around 20% by 2035 from about 15% currently, contributing an estimated $930 billion to the economy.

Morgan Stanley's base-case forecast assumes real manufacturing GDP growth accelerates to around 9% annually over the next five years, compared with an average of 6.5% over the previous five years.

"Success in expanding manufacturing is imperative to India's medium-term growth trajectory," the brokerage said, citing sustained government industrial policy, efforts to increase India's share in global exports and multinational companies diversifying production away from China.

PLI Scheme, Electronics Drive Manufacturing Growth

Morgan Stanley linked its optimistic outlook to the impact of India's Production-Linked Incentive (PLI) scheme, launched in 2020 with an outlay of $33 billion.

According to the report, electronics production has increased nearly seven-fold since FY15, while mobile phone exports have surged from $260 million in 2015 to $29.6 billion in the current financial year, making smartphones India's largest export product.

The brokerage highlighted Apple as a key example of the country's growing manufacturing capabilities, estimating that the company assembled around 55 million iPhones in India in 2025, with nearly 25% of its global iPhone production now taking place in the country.

Risks Remain Despite Strong Outlook

Despite its bullish long-term view, Morgan Stanley said risks remain. The brokerage cited weaker global demand, slower implementation of industrial reforms and India's relatively low participation in global value chains as potential challenges.

It noted that India's global value chain participation stood at 0.387 in 2024, below Vietnam's 0.575 and the Philippines' 0.412.

Morgan Stanley outlined a range of possible outcomes for India's manufacturing sector by 2035, projecting output of $904 billion in its bear-case scenario and $2.05 trillion in its bull case, while maintaining a base-case estimate of about $1.45 trillion.