India's Economic Ascent: A Promising Market Amid Global Challenges

Morgan Stanley forecasts India's economic growth to rebound, driven by fiscal and monetary policies and rising service exports. India's stock market, bolstered by strong economic fundamentals and high potential, remains attractive amidst global uncertainties. Inflation and current account deficits are projected to stabilize, supporting robust GDP growth through FY2026.

Morgan Stanley's recent report indicates that India is on the brink of becoming the world's most sought-after consumer market, benefiting from a significant energy shift, a rising credit-to-GDP ratio, and an expanding manufacturing sector. The report attributes India's growing global output share to robust population growth, democratic governance, macroeconomic stability, and improved infrastructure.

Expectations are high for a rebound in India's economic growth post-2024 slowdown, with GDP growth forecasted at 6.3% in FY2025 and 6.5% in FY2026. This is fueled by supportive fiscal and monetary policies and service export recovery. Despite stability, risks loom from external factors like global trade policies, U.S. interest rate movements, and geopolitical tensions.

India's stock market shows promise with perceived undervaluation despite strong economic fundamentals. Earnings growth is expected, particularly in financials, consumer discretionary, industrials, and technology sectors. An accommodative monetary stance by the RBI is anticipated to further stimulate growth, complemented by government efforts to boost consumption and capital expenditure.

(With inputs from agencies.)