Morgan Stanley Raises India’s Growth Forecast for FY26 and FY27

Morgan Stanley, a leading global financial services firm, has modestly upgraded India’s GDP growth forecast to 6.2% for FY26 and 6.5% for FY27, citing a strong domestic demand outlook and improving macroeconomic stability. The upward revision reflects confidence in India’s internal growth engines despite global uncertainties.

Why in News?

Morgan Stanley’s latest economic outlook report released on May 21, 2025, revises India’s growth projections upward for the next two fiscal years. This development is crucial as it signals growing investor confidence in India’s economic fundamentals and resilience amid global trade tensions and uncertain external conditions.

Key Points

• FY26 Forecast: Revised from 6.1% to 6.2%
• FY27 Forecast: Revised from 6.3% to 6.5%

Reasons for the Upgrade

• De-escalation of US-China trade tensions, improving external demand marginally.
• Domestic demand as the key driver, particularly urban consumption and robust rural demand.
• Continued government policy support, especially through capex-focused fiscal policy.
• Easier monetary policy anticipated from the RBI due to stable inflation and growth moderation.

Detailed Factors Behind the Forecast

Consumption Recovery

• Becoming more broad-based.
• Urban consumption is improving.
• Rural demand remains strong.

Investment Scenario

• Public and household capital expenditure (capex) are leading.
• Gradual recovery expected in private corporate capex.

Policy Outlook

• RBI expected to ease monetary policy further.
• Fiscal consolidation to continue with a focus on capital expenditure.
• Overall macroeconomic stability remains “within the comfort zone” with robust buffers.

Background

• Morgan Stanley is among the top financial institutions globally, frequently cited for economic forecasting.
• India had previously received projections of 6.1% (FY26) and 6.3% (FY27) from the firm.
• The RBI’s official projection for FY26 stands at 6.5%.