global-economic-slowdown-won-t-affect-india-asia-pacific

India’s real GDP growth on a Q4-over-Q4 basis in 2025 would be at 5.9 per cent and in 2026, it is forecast to be 6.4 per cent, says a Global Investment Committee (GIC) report by global investment firm, Morgan Stanley.

“India remains the fastest-growing economy in our coverage, with real GDP growth at 5.9 per cent, Q4/Q4 in 2025 and 6.4 per cent in 2026,” it said.

However, the report clearly states a global economic slowdown with the real global GDP projected to decline from 3.5 per cent in 2024 to 2.5 per cent in 2025, owing to fluctuating US tariff rates. 

 

Also Read: India’s FY26 growth forecast at 6.5, says S&P report

"We anticipate global growth stepping down by a percentage point in 2025 from 2024, with US trade policy and the uncertainty it engenders serving as the main drivers," the report said.

In the United States, specifically, Morgan Stanley expects real GDP growth to fall from 2.5 per cent in 2024 to just 1.0 per cent in both 2025 and 2026. 

China's real GDP growth, on the other hand, will be at 4.0 per cent in 2025 and 4.2 per cent in 2026, with deflation remaining a concern. Slower growth in China’s economy has been attributed to tariffs, which will contribute to a reduction of about 0.5 percentage points in real growth in 2025 compared to 2024.

In the European Union (EU), growth is not expected to rise above 1 per cent annually during the forecast period due to weaker private consumption and exports. 

In Japan, the global trade is likely to affect exports, but consumer spending is expected to stay strong, helping nominal GDP continue to grow.

The only beam of good news is expected from Asia Pacific, said the report, which will be driven by ongoing reforms and strong domestic growth trends. 

Emerging markets, such as India, Singapore, and the United Arab Emirates (UAE), will show positive growth during mid-2026.
As per the report, while Indian equities are considered expensive when compared to historical levels, the strong domestic retail and institutional investment flows will support high valuations.