Morgan Stanley Lifts India’s FY26 Growth Forecast To 6.2% On Strong Domestic Demand

Morgan Stanley has slightly raised its GDP forecast for India, projecting 6.2% year-on-year growth for FY2026, up from 6.1%. It has also revised the FY2027 forecast to 6.5%, up from 6.3%, citing improved global trade outlook and resilient domestic drivers.

The firm attributed the upgrade to the easing of US-China trade tensions, which it said improves external demand prospects. However, it stressed that India’s growth will largely be led by domestic demand.

“Domestic demand trends will be the key driver of India’s growth momentum amid lingering uncertainty on the external front,” Morgan Stanley said.

Policy Support and Investment Trends

The report said continued policy support will further boost growth. It expects the Reserve Bank of India (RBI) to adopt a deeper easing cycle due to slowing growth and manageable inflation. Fiscal policy, it noted, will stay focused on capital expenditure.

“Policy support is likely to continue through easier monetary policy while fiscal policy prioritises capex. Macro stability is expected to be in the comfort zone with robust buffers,” the report stated.

Morgan Stanley expects a broad-based recovery in consumption. Urban demand is set to rise, while rural consumption remains strong. On investment, the firm sees growth driven by public and household capex, with private corporate capex recovering gradually.

The report supports the government’s budget focus on fiscal consolidation while pushing infrastructure. The RBI has forecast India’s GDP to grow by 6.5% in FY26, aligning with Morgan Stanley’s long-term growth view.

Also Read: Bullet Train Project To Adopt European Technology For Signalling And Telecom Systems