Morgan Stanley has revised upwards its forecast for India’s GDP growth in 2025-26, citing strong April-June quarter numbers and expectations that upcoming cuts in Goods and Services Tax (GST) will boost domestic demand.
The agency now projects India’s real GDP growth at 6.7 per cent for 2025-26, compared to its earlier estimate of 6.2 per cent. The upgrade follows the robust 7.8 per cent growth recorded in the April-June quarter of the current financial year.
According to the report, impending GST tax cuts, the upcoming festive season, and steady rural demand are expected to support consumption and offset the drag from weaker external demand caused by higher US tariffs.
Morgan Stanley estimates that the incremental drag from external demand, at around 50 basis points, could be balanced by a similar boost from GST reductions. The report also noted that a good monsoon and strong kharif sowing indicate resilience in agriculture, which should aid rural growth.
In the April-June quarter, both government and private consumption gained momentum, rising by 7.5 per cent and 7 per cent year-on-year respectively. Gross fixed capital formation moderated to 7.8 per cent but remained healthy. Government expenditure was front-loaded, providing further support to consumption and investment.
On the external front, net exports became a drag as imports outpaced exports. Export growth showed an uptick, largely due to front-loading of shipments to the US ahead of new tariffs, while exports to other markets slowed.
-IANS