India has been lagging backward for a long time when it came to export manufactured goods, but is very strong in the export of services to the world. A report by Global Financial Major Morgan Stanley said on Tuesday that the US, with the commissioning of the heat on its major trading partners, imports the goods manufactured for billions, India’s low freight exports can be its saving grace.
“Business stress will probably be a stretch on Asia’s development approach. A report by Morgan Stanley’s main Asia economist Chetan Ahya and his team members states that India is still best in this backdrop against this backdrop – the best against this background is – the best against this background.
“Investors are very doubted about the story of India’s development. But we feel that improper tightening of fiscal and monetary policies will help promote recovery, ”the report states.
“(Monetary) Ease is hitting the three fronts – rates, liquidity injections and full throttle in spontaneity. Trade will be weight on the trading approach of the stress sector, but India highlights the export of its low goods to the GDP ratio. (At the same time), policy support that will turn around the approach of its domestic demand, allow India to perform better. ,
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Morgan Stanley Report It claims that India displays flexibility in economic performance, especially during the global trade recession due to two important factors.
- First, the nation maintains the lowest ratio in the field of goods export to GDP.
- Secondly, its services demonstrate strong defensive characteristics in exports, while consistently expanding the market share, providing an imbalance to potential trade effects.
Why did the Indian economy slow down?
Turning back, it is clear that there were an unexpected concurrent restrictions of both fiscal and monetary measures as a result of economic recession. In the context of India, the stable macroeconomic indicators do not show any warning signs, the implementation of fiscal and monetary controls reduced the growth rate.
Government expenditure-which has an account for 28% of GDP-The trough in July-24 is contracted by -6% Y into July-24 on a three-month adopted basis between the election, and then recovered in the post-colored elections, especially on the front of the capital expenditure (which is an average -12% in the May-Nusikia-24. Monetary policy was tightened on all three fronts of regulatory measures.
What is the road for economic reform?
Recovery will continue in the coming months. Green shooting is already emerging in recent data. For example, the Goods and Services Tax (GST) Revenue-Janvari-February 2025 intensified an average of 10.7%.
GST Revenue Retailing
According to Morgan Stanley report, recovery will be conducted by:
1) Continuous speed in government capex expenses: The increase in capital expenditure of the central government has clearly intensified in December and January. In the F2026 budget plan, capital expenditure is estimated to increase at 10.1%y, indicating continuous support for public capx.
Recovery is going on in government capex expenses
2) Triple ease on monetary policy: Morgan Stanley hopes that policy rates, liquidity and policy in the regulatory front will be ease to support development recovery. This hopes that the April meeting is expected to cut a second 25bps rate with the risk of higher rate cuts if it plays more slowly than the recovery of development. The RBI is expected to continue management of liquidity situation, especially in terms of seasonal increase in liquidity deficit towards the end of the financial year (March).
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To the extent that the RBI has begun to reduce the regulatory tightening on non-bank financial companies (NBFCs)-as is clear in the recent rollback of 25 PPT increase in the risk load for bank credit for NBFCS-Murgan Stanley believes that it will help improve the liquidity access to NBFC lenders and end borrowers.
3) Moderation in food inflation lifts real domestic income: The headline CPI has taken one step down at a five -month low of 4.3%Y from 10.9%Y to 6%Y from 10.9%Y to 6%Y to moderate from October. Morgan Stanley hopes to have a tendency of disintegration at the headline CPI level, with a trend in high frequency food prices indicating continuously in the month-march in February and March in February and March.
Food inflation trending downwards
4) Improvement of services exports: Morgan Stanley believes that the export of India’s services should remain relatively healthy. During a time when the global trade environment decreases, the goods may export contracts but services are usually not done. Strength in export of services should also be reflected in a pickup in the growth of urban jobs and therefore personal consumption with an interval.
Can India avoid tariffs, can reach a business deal with America?
India faces significant risk for potential tariff growth within Asia, especially about mutual tariffs, its high import tariff rates, sufficient non-tariff barriers and considerable trade surplus with the US. Morgan Stanley’s report stated that accurate effect is uncertain, as the US administration has not yet provided detailed explanation about the implementation of mutual tariffs.
India is exposed to direct tariff risks
India’s vulnerability extends to its drug export, which is 2.8% of total exports and 0.3% of GDP, as these products have been identified as possible goals for tariff implementation by President Trump.
Whenever a trade agreement between India and the United States is obtained from falling 2025, the process of interaction is likely to take complex and time due to various bilateral trade complications.
“While India is exposed to direct tariff risks, we have constantly highlighted that a major impact on the increase with tariffs probably comes through the indirect transmission channel of weak corporate belief that comes with increased policy uncertainty and spillover weakened corporate self -confidence. From this point of view, India’s ability to generate low cargo trade orientation and domestic demand offset means that it is one of the least exposed economies within the field from an indirect impact, ”the report states.
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