Morgan Stanley sees India as world’s leading consumer market

Undergoing a significant energy transition, rising credit-to-GDP ratio, and expanding manufacturing sector, India is poised to become the world’s most sought-after consumer market, Morgan Stanley’s latest report has said.

According to the report released on Thursday, India is gaining a greater share in global output due to strong foundational factors such as robust population growth, a functioning democracy, macroeconomic stability, better infrastructure, a growing entrepreneurial class, and improved social outcomes.

The financial services giant expects India’s economic growth to recover following a slowdown in the second half of 2024.

Forecasting GDP growth at 6.3 per cent in FY2025 and 6.5 per cent in FY2026, driven by fiscal and monetary policy support, as well as a recovery in service exports, the report emphasises that macroeconomic stability should remain within a comfortable range, providing policymakers with flexibility.

It noted that risks stem primarily from external factors such as global trade policies, interest rate movements in the US, and geopolitical tensions.

Morgan Stanley believes India's stock market outlook remains promising. It indicated that equity markets are currently undervalued despite strong fundamentals and macroeconomic improvements. Expecting the earnings growth to accelerate, with financials, consumer discretionary, industrials, and technology sectors likely to outperform, the Morgan Stanley suggested that India’s strong economic fundamentals and stable macroeconomic environment make it an attractive market, especially in an uncertain global economic landscape.

Further noting that on the monetary policy front, the Reserve Bank of India (RBI) has adopted an accommodative stance by cutting rates and increasing liquidity in the system, the report anticipated another rate cut in April, further supporting economic growth.