Morgan Stanley: India Holds Strongest Position in Asia Amid Global Trade Tensions
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Synopsis
On March 11, Morgan Stanley reported that despite ongoing trade tensions affecting Asia's growth, India is well-positioned due to low goods exports, strong services exports, and supportive domestic policies, indicating a promising recovery trajectory.
Key Takeaways
- India is the best-positioned country in Asia amidst trade tensions.
- Low goods exports to GDP ratio minimizes exposure to trade disruptions.
- Strong services exports and policy support enhance domestic demand.
- GST revenue growth indicates a positive economic trend.
- Government spending and easing monetary policies will support recovery.
New Delhi, March 11 (NationPress) Despite ongoing trade tensions likely hindering Asia’s growth, India is positioned most favorably in the region due to its minimal goods exports, robust services exports, and supportive policies aimed at enhancing domestic demand, as reported by Morgan Stanley on Tuesday.
The unwarranted dual tightening of fiscal and monetary policies is expected to reverse, aiding India's recovery.
“In fact, monetary easing is actively being implemented across three dimensions – interest rates, liquidity provisions, and regulatory relaxation. While trade tensions could affect the region’s trade forecasts, India remains less vulnerable due to its low goods exports to GDP ratio,” the report indicated.
Furthermore, the policy initiatives aimed at improving domestic demand are set to allow India to excel.
“We anticipate that the recovery will strengthen over the next months. Early signs are already visible in recent data. Our preferred high-frequency indicator – goods and services tax (GST) revenue – has surged to an average of 10.7 percent in January-February 2025 compared to an average of 8.9 percent in Q3 2024 and 8.3 percent in Q4 2024,” the Morgan Stanley report elaborated.
When adjusting for the additional day in February last year (leap year), GST revenue reportedly grew by nearly 12.6 percent in January-February 2025.
Morgan Stanley posits that the recovery will be fueled by ongoing momentum in government capital expenditure, comprehensive easing of monetary policy, a decline in food inflation enhancing real household incomes, and a surge in services exports.
“We predict that policy easing across interest rates, liquidity, and regulatory aspects will bolster the growth recovery. Most of these initiatives have been implemented only in the last six weeks, so it will take time for their effects to fully materialize in supporting the recovery,” the report emphasized.
Private consumption has shown signs of revival in Q4 2024, with real private consumption growth accelerating to 6.9 percent. Fast-moving consumer goods (FMCG) volume growth has also risen to 7.1 percent in the quarter, driven by a stronger rebound in rural volume.
Additionally, the Reserve Bank of India’s (RBI) recent moves to ease regulatory restrictions on non-bank financial companies (NBFCs) – such as the recent rollback of the 25ppt increase in risk weights for bank lending to NBFCs – is expected to improve liquidity access for NBFC lenders and end borrowers.
