Morgan Stanley Projects India's Economic Recovery

1 min read     Updated on 22 Aug 2025, 04:20 PM
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Anirudha BasakBy ScanX News Team
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Overview

Morgan Stanley's Chief Asia Economist, Chetan Ahya, predicts India's economic growth to slow to 6% by December due to global trade deceleration, but anticipates a recovery. The rebound is expected to be driven by government initiatives including income tax cuts, increased capital expenditure, RBI rate cuts, and GST reductions. The RBI is likely to implement another rate cut in October, with potential for more if global disinflationary pressures increase. Core inflation in India remains below 4%. In the global context, U.S. growth is projected to slow from 2.00% to 1.00% in Q4, but a recession is not expected. Regarding India-China trade, Ahya notes potential for increased trade but highlights challenges in identifying India's exportable products to China.

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Morgan Stanley's Chief Asia Economist, Chetan Ahya, has provided a comprehensive outlook on India's economic trajectory, projecting a recovery despite an anticipated slowdown in the near term.

Economic Growth Forecast

According to Ahya, India's economic growth is expected to decelerate to around 6% by December, primarily due to the global trade slowdown. However, a recovery is anticipated, driven by a series of government measures and policy actions.

Key Factors Supporting Recovery

The projected economic rebound is expected to be underpinned by several government initiatives:

  1. Income tax cuts
  2. Increased capital expenditure
  3. Reserve Bank of India (RBI) rate cuts
  4. Goods and Services Tax (GST) reductions

Monetary Policy Outlook

The RBI is anticipated to implement another rate cut in October. Ahya suggests that there could be potential for additional cuts if global disinflationary pressures intensify. Notably, core inflation in India remains below 4%, with GST rationalization expected to contribute positively to disinflation.

Global Context: U.S. Economic Projections

In the broader global context, Morgan Stanley's outlook for the United States indicates:

  • Growth is projected to slow from 2.00% year-on-year in Q2 to 1.00% in Q4
  • Despite the slowdown, a recession is not expected
  • The Federal Reserve's decision on a September rate cut will largely depend on upcoming jobs data

India-China Trade Relations

Addressing bilateral trade between India and China, Ahya notes:

  • There is potential for increased trade between the two nations
  • However, India faces challenges in identifying exportable products to China
  • Both countries compete in similar export markets, complicating trade dynamics

This comprehensive economic outlook from Morgan Stanley provides valuable insights into India's economic trajectory, highlighting both challenges and opportunities. As global trade patterns evolve and domestic policies take effect, the Indian economy is poised for a potential recovery, albeit with careful navigation of both internal and external factors.

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