In its latest Global Investment Committee report, Morgan Stanley has reaffirmed India’s economic resilience, projecting it to remain the fastest-growing major economy through 2026, despite mounting global economic pressures. According to the report, India’s GDP is expected to grow 5.9% in Q4 of 2025 and 6.4% in 2026, outperforming all other major global economies.

This forecast positions India as a key global growth engine, standing in contrast to a widespread deceleration in global economic momentum, which is being dragged down by sluggish consumption, rising trade barriers, and geopolitical uncertainties.

India’s Growth Against a Global Slowdown

Global real GDP growth is projected to decline from 3.5% in 2024 to 2.5% in 2025, signaling a broad-based economic slowdown across advanced and emerging economies. In contrast, India’s macroeconomic fundamentals remain intact, supported by a stable policy environment, structural reforms, and growing consumer demand.

Key global economies such as:

• The United States

• The eurozone

• China

are expected to register subdued growth rates due to challenges like:

• Weakening consumption demand

• Export volatility

• Supply-chain realignments

• Increased tariff barriers and protectionist policies

India, however, continues to stand apart due to its unique combination of cyclical strength and structural transformation.

Drivers of India’s Economic Resilience

1. Strong Domestic Demand:
   Consumption demand remains robust, especially in urban and semi-urban areas, supported by rising disposable income, increasing digitisation, and strong employment in services.

2. Structural Reforms:
   Reforms like GST, Insolvency and Bankruptcy Code (IBC), PLI schemes, and recent financial sector clean-up have improved long-term macroeconomic sustainability.

3. Stable and Pro-Growth Policy Framework:
   The Indian government and the Reserve Bank of India (RBI) continue to strike a balance between inflation control and growth orientation, maintaining a predictable policy backdrop.

4. Infrastructure and Capex Push:
   The National Infrastructure Pipeline (NIP) and public capital expenditure have catalyzed private sector investment, especially in manufacturing, logistics, and clean energy.

India’s Growing Importance in Global Indices

The report highlights India’s increasing weight in global equity indices, particularly the MSCI Emerging Markets Index. This shift reflects:

• Steady nominal GDP growth

• Rising market capitalisation

• Consistent foreign portfolio inflows

• Macroeconomic stability

Morgan Stanley attributes this rise to India’s long-term growth visibility, which makes it an attractive destination for global institutional investors.

Investment Outlook: Overweight Stance on India

Despite a perception that Indian equities are trading at premium valuations compared to historical levels, Morgan Stanley remains overweight on India in the Asia-Pacific region. Alongside Singapore and the United Arab Emirates (UAE), India is listed among the top investment destinations.

This optimism is grounded in the following:

• Strong corporate earnings recovery

• High participation by domestic institutional investors (DIIs) and retail investors

• Digital adoption across financial and consumption sectors

• Efficient transmission of policy incentives to real economic activity

The report also observes that valuation premiums are justified due to India’s high ROE (Return on Equity), growth visibility, and low volatility compared to peers.

Key Growth Sectors

India's economic momentum is being driven by performance in several high-growth sectors:

• Information Technology (IT) and SaaS

• Pharmaceuticals and Life Sciences

• Clean Energy (Solar, EVs, Green Hydrogen)

• Digital Infrastructure and Fintech

• Manufacturing under PLI Schemes

• Banking and Financial Services

These sectors have shown robust revenue and earnings visibility, backed by domestic consumption trends and export competitiveness.

Risks and Headwinds

Despite the positive outlook, the report notes a few macro risks that could temper India’s near-term growth trajectory:

• Global crude oil price volatility

• Geopolitical tensions (especially in the Indo-Pacific)

• Currency market pressures in the face of strong USD

• El Niño-related climate disruptions impacting agriculture

However, India’s strong forex reserves, resilient financial sector, and diversified growth base provide enough cushion against these headwinds.

Retail Investor Strength and Market Liquidity

India’s market is increasingly being supported by retail investor participation, particularly through Systematic Investment Plans (SIPs) in mutual funds. As of mid-2025:

• SIP flows exceed ₹19,000 crore per month

• Demat accounts have crossed 15 crore

• Retail holding in listed companies continues to rise

This democratisation of investment participation makes Indian markets less vulnerable to global capital outflows, and more reflective of domestic economic health.

India’s Strategic Role in Asia-Pacific

Within the Asia-Pacific region, India is being viewed as a strategic economic anchor. It offers a large domestic market, stable policy environment, and geopolitical neutrality, making it a preferred destination for:

• Supply chain diversification

• Nearshoring and friend-shoring investments

• R&D and talent hubs for global corporations

This strategic positioning is helping India absorb some of the manufacturing and services exodus from China, Vietnam, and other regional economies facing demographic and political challenges.

Conclusion

With GDP growth projected at 6.4% in 2026 and 5.9% for Q4 2025, India continues to lead the global economic growth race. Despite a turbulent global backdrop, the Indian economy benefits from robust demand fundamentals, policy continuity, and structural tailwinds.

Morgan Stanley’s report reinforces India’s narrative as a safe, high-growth economy with growing importance in global capital allocation frameworks. As advanced economies slow down and protectionism rises, India’s balanced macro mix of consumption, investment, and reform ensures that it remains Asia’s—and possibly the world’s—most resilient economic story.

The Upcoming IPOs in this week and coming weeks are Smarten Power Systems, Glen Industries, Travel Food Services, Anthem Biosciences, Chemkart India, Meta Infotech, Happy Square Outsourcing Services, Cryogenic OGS.

The Current active IPO are Crizac, Silky Overseas, Vandan Foods, Pushpa Jewellers, Cedaar Textile, Marc Loire Fashions.

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