India's set for significant output surge: Credit growth, consumer demand, macro tailwinds in focus, says Morgan Stanley; oil prices, geopolitics seen as key risks
The analysis indicated that India's increased credit-to-GDP ratio and expanding manufacturing sector will enhance its global economic influence.
The nation's growth trajectory is supported by several key factors, including sustained demographic growth, democratic governance, consistent macroeconomic policies, enhanced infrastructure, rising entrepreneurship, and improved social indicators. "India will become the world's most sought-after consumer market, it will undergo a major energy transition, credit to GDP will rise and manufacturing could gain share in GDP," the report cited by ANI claimed.
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India's services sector logs 11-month high- Export orders, sales drive July growth
The analysis forecasts India's evolution as a prime consumer market globally. The country is anticipated to implement significant energy reforms whilst experiencing substantial growth in its credit and manufacturing segments.
The report indicated that reduced oil dependency in GDP calculations and increased exports, particularly in services, will contribute to fiscal strengthening.
Within three years, the government is expected to achieve a primary surplus.
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This development, if achieved, coupled with decreased saving disparities, might result in fundamentally lower real interest rates.
The combination of sustained growth, reduced volatility and declining interest rates is projected to support higher P/E ratios in the equity markets.
Indian households are increasingly investing in equities, a trend that is likely to persist. Enhanced macroeconomic stability and evolving household financial patterns are maintaining consistent stock market demand.
Despite stock devaluation compared to long-term bonds and gold, India continues to increase its proportion of global GDP.
Additionally, the analysis suggests that the period of modest earnings growth, which commenced in the second quarter of FY2025, appears to be concluding, although market sentiment remains cautious.
While FPI positioning is at its lowest since 2000, Morgan Stanley maintains optimism regarding India's future prospects.
India's low beta characteristic suggests potential resilience during global market downturns, though it might lag during worldwide market rallies.
The analysis also cautions about potential risks including global economic deceleration, deteriorating geopolitical situations, increasing oil prices, and ongoing supply chain complications, particularly regarding rare earth elements and fertilisers.
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