India to remain fastest-growing economy in 2025-26 as global growth decelerates: Morgan Stanley

India is projected to maintain its position as the fastest-growing economy among all countries covered by global investment firm Morgan Stanley, according to the latest report from its Global Investment Committee (GIC). The report forecasts India's real GDP growth at 5.9% on a Q4-over-Q4 basis in 2025 and an acceleration to 6.4% in 2026, signaling strong resilience despite a challenging global economic outlook.

In its baseline assessment, Morgan Stanley's GIC anticipates a significant slowdown in global economic growth, with real GDP growth projected to decline from 3.5% in 2024 to 2.5% in 2025. This deceleration is primarily attributed to an impending "trade shock" and the uncertainty generated by US trade policy, which is expected to push most economies below their potential growth levels. The United States is forecast to see its real GDP growth drop to just 1.0% in both 2025 and 2026, while the eurozone is not expected to surpass 1% annual growth during this period due to weaker private consumption and exports. China's economy is also projected to slow, with tariffs contributing to a reduction in growth and deflation remaining a concern.

Despite these global headwinds, India's economic momentum is expected to be buoyed by strong institutional investment flows and robust domestic retail activity, which will continue to support high equity valuations even if they appear expensive compared to historical levels. Morgan Stanley maintains an "overweight" stance on India, Singapore, and the United Arab Emirates (UAE), citing ongoing reforms and strong domestic growth trends as key drivers. The report underscores India's unique position as a bright spot amidst a widespread global deceleration, offering sustained growth and investment opportunities.