Top factors working for the Indian economy and what's needed to give it a further push

The Indian equity markets are expected to continue outperforming global peers helped by strong corporate earnings according to most market watchers. The alternate-to-China factor is also working in its favour.

Morgan Stanley is of a similar opinion and Chetan Ahya, Chief Asia Economist at the firm spoke to CNBC-TV18 to explain the rationale behind this bold bet.

Policy approach shift and job creation:  Ahya praised the government's policy action, especially since 2019, and in the exclusive chat said that the focus on job creation rather than redistribution is significant.

"I was kind of always comparing India and China and China manages social stability by focusing on job creation and private investment. But India was taking up a more balanced approach and focused a lot more on redistribution. But the shift that is happening now is that focus on private investment and job creation is the biggest reason why we are making this call,” he said.

Exports: The second reason, according to Morgan Stanley is the change in trade dynamics being witnessed.

"This is happening in terms of the dynamic of India's exports and global market share in goods exports and services exports, said Ahya.

Outsourcing from India: The chief economist at Morgan Stanley believes that the COVID-19 pandemic helped the services exports from the country.

"India's market share in services exports has gone up significantly. And at the same time, this shift and focus towards private investment are going to help increase India's market share in manufacturing exports.”

Rupee depreciation behind us: Morgan Stanley's global macro strategy team has said that they are not going to short treasuries anymore and at the same time they have turned neutral on the dollar.

"The bulk of the run in the dollar is done and over the next 3-4 months, they see that transition where the dollar begins to weaken. So if you put that picture in mind, we think the bulk of the depreciation pressures on the rupee is now behind us.”

Ahya believes that farm sector reforms, urban eco job creation and bridging the rural-urban gap should be focused upon.

“When you boost private investment and create jobs in the urban economy that filters through to the rural economy, and at the same time, the government needs to take out more reforms to boost productivity in the farm sector. So both approaches have to come together. But it is very important to create jobs in the urban economy then only you will see that migration and transfer of workers from rural India to urban India,” he said.