India set to become world’s most sought-after consumer market: Morgan Stanley

August 13, 2025

New Delhi: India is on track to become the world’s most sought-after consumer market, undergo a significant energy transition, experience a rise in its credit-to-GDP ratio, and see manufacturing capture a larger share of GDP, according to a report by Morgan Stanley.

Structural Shifts to Support Lower Interest Rates
The report highlighted that declining oil intensity in India’s GDP, rising exports—particularly in services—and fiscal consolidation, with a likely primary surplus in three years, will reduce the saving imbalance. This structural change is expected to enable lower real interest rates in the economy.

Stable Inflation and Strong Growth Bolster Equity Markets
Morgan Stanley noted that lower inflation volatility, driven by supply-side factors and flexible inflation targeting, will likely reduce volatility in interest rates and growth. Combined with high growth, falling interest rates, and low beta, this could lead to higher price-to-earnings (P/E) ratios, supporting a sustained shift in household balance sheets toward equities.

Equities Outpacing Bonds and Gold
The report observed that despite recent price movements, Indian equities have de-rated relative to long-term bonds and gold, while India continues to increase its share in global GDP. The soft earnings growth seen since Q2 FY2025 now appears to be ending, though market confidence may still require clarity on external growth and GST rationalization.

Growth Catalysts Ahead
Key drivers for further growth include a final trade deal with the US, additional capital expenditure announcements, acceleration in loans visible in the corporate bond market, uniform improvement in high-frequency economic data, and enhanced trade with China.