Summary:

Morgan Stanley’s latest analysis underscores India’s rapid ascent as a dominant consumer market, driven by a pivotal energy transition, a rising credit-to-GDP ratio and a thriving manufacturing sector. The report attributes India’s growing contribution to global output to key structural strengths, including a steadily expanding population, macroeconomic resilience, infrastructure advancements, a flourishing entrepreneurial ecosystem and improved social indicators. GDP is projected to grow by 6.3% in FY25 and 6.5% in FY26, supported by proactive fiscal and monetary policies and a rebound in service exports. While macroeconomic stability is expected to hold steady, external uncertainties such as shifts in global trade policies, U.S. interest rate trends and geopolitical developments could present potential headwinds.

India’s stock market outlook remains positive, as equity markets continue to be undervalued despite robust fundamentals. Key sectors, including financials, consumer discretionary, industrials and technology, are poised to outperform as corporate earnings gain momentum. The Reserve Bank of India (RBI) has maintained a supportive monetary approach, implementing rate cuts and injecting liquidity, with another rate reduction anticipated in April. On the fiscal side, the government has focused on boosting consumption through income tax reductions and increased capital spending while ensuring fiscal prudence. Inflation is expected to ease, with the Consumer Price Index (CPI) projected to decline from 4.9% in FY25 to 4.3% in FY27. The current account deficit is likely to remain below 1% of GDP, reinforcing India’s external stability. By 2025, India is expected to regain its growth momentum among emerging markets.

Source: IBEF

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