Morgan Stanley Report: Trade Tensions to Impact Asia, but India Poised for Strong Growth
New Delhi, March 11 – A recent report by Morgan Stanley highlighted that trade tensions will continue to challenge Asia’s economic growth. However, India remains the best-positioned economy in the region due to its lower reliance on merchandise exports, strong service exports, and policy support for domestic demand.
The report emphasized that easing fiscal and monetary policy constraints would accelerate India’s economic recovery. It noted that monetary easing is being fully implemented across three key areas: interest rates, liquidity injections, and regulatory relaxations. While trade tensions are expected to affect the broader regional trade outlook, India faces lower risk due to its lower export-to-GDP ratio.
The report further stated that policy support, which is set to bolster domestic demand, will help India outperform its regional peers. Morgan Stanley remains optimistic about India’s growth trajectory, stating that recent economic data has shown positive signals. The firm’s high-frequency metric—Goods and Services Tax (GST) revenue—grew at an average of 10.7 percent in January-February 2025, compared to 8.9 percent in the third quarter of 2024 and 8.3 percent in the fourth quarter. Adjusting for the extra leap year day in February 2024, the GST revenue growth in the first two months of 2025 stands at 12.6 percent.
The report also highlighted that sustained public capital expenditure, threefold monetary easing, easing food inflation, rising real household income, and improving service exports would support economic recovery.
Morgan Stanley expects that policy measures, including liquidity infusion and regulatory relaxations, will further aid growth. Most of these measures have been implemented within the past six weeks, meaning their full impact on economic recovery will take some time to materialize.
Private consumption in the fourth quarter of 2024 showed signs of improvement, with real private consumption growth rising to 6.9 percent. Additionally, the fast-moving consumer goods (FMCG) sector witnessed a 7.1 percent increase in volume growth, primarily driven by strong rural demand recovery.
Meanwhile, the Reserve Bank of India (RBI) has begun easing regulatory restrictions on non-banking financial companies (NBFCs). A recent rollback of a 25-percentage-point increase in risk weights on bank credit to NBFCs indicates a shift towards a more accommodative policy.
The report concluded that these measures will improve liquidity access for NBFC lenders and, in turn, facilitate better credit flow to end borrowers, further strengthening India’s economic momentum.
