From ‘Dead’ To Dominant? Morgan Stanley Sees India Powering Past Donald Trump’s Claim

India is set to become the world’s most attractive consumer market, shift towards cleaner energy, and expand the role of manufacturing in its economy, according to a new report by Morgan Stanley. The bank also expects the country’s credit-to-GDP ratio to keep rising in the coming years, offering a sharp contrast to recent remarks by former US President Donald Trump, who described India as a “dead economy.”

The report says several long-term changes are driving this outlook. India is using less oil compared to its overall economic output, while exports—especially in services—are growing in importance.

Along with stronger fiscal discipline and a likely primary budget surplus within three years, these factors are expected to reduce the country’s savings gap. This could lead to lower real interest rates over time.

Morgan Stanley notes that inflation in India has become more stable due to supply-side reforms and policies like flexible inflation targeting. This stability is likely to make interest rates and GDP growth less volatile, creating a more predictable environment for investors.

Also Read: Beyond Rhetoric: India's Booming Economy Disprove Trump & Gandhi's "Dead Economy" Narrative | Republic World

The bank believes that strong growth, lower volatility, falling interest rates, and low market risk could push up stock market valuations. Indian households are already putting more of their money into equities, and this trend is expected to continue.

Even though India’s share in the global economy is growing, its stock valuations have slipped compared with long-term bonds and gold. The report says that the slowdown in corporate earnings, which began in the second quarter of FY25, appears to be ending—helped by a more supportive central bank. However, a full recovery in market confidence may depend on global economic trends and changes to GST rates.

Looking forward, Morgan Stanley lists several possible drivers of growth: a trade deal with the US, new capital investment plans, faster credit growth (already visible in the corporate bond market), stronger economic indicators, and better trade relations with China.