India's GDP pegged at 6.4% in 2026, to remain fastest-growing economy till next year despite global slowdown: Report

Morgan Stanley's Global Investment Committee (GIC) has pegged India's real GDP growth at 5.9 per cent on a Q4-over-Q4 basis in 2025, with the country expected to maintain its position as the fastest-growing economy among all the countries covered by the global investment firm.

According to the report, the GDP growth of India is forecast to be 6.4 per cent in 2026.

“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.

Global economy to slow down

In its baseline outlook, the committee expects global economic growth to slow down significantly. Global real GDP growth is projected to decline from 3.5 per cent in 2024 to 2.5 per cent in 2025.

The report noted that a trade shock is likely to affect multiple economies at the same time, pushing most of them below their potential growth levels.

It stated, "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."

In the United States, 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. Similarly, in the eurozone, growth is not expected to rise above 1 per cent annually during the forecast period, due to weaker private consumption and exports.

China's economy is also expected to slow down, with tariffs contributing to a reduction of about 0.5 percentage points in real growth in 2025 compared to 2024.

The report forecasts China's real GDP growth at 4.0 per cent in 2025 and 4.2 per cent in 2026, with deflation remaining a concern. In Japan, the global trade shock is likely to affect exports, but consumer spending is expected to stay strong, helping nominal GDP continue to grow.

Positive momentum in Asia Pacific

Despite global challenges, the report sees some positive momentum across Asia Pacific and emerging markets through mid-2026. It maintains an overweight stance on India, Singapore, and the United Arab Emirates (UAE), driven by ongoing reforms and strong domestic growth trends.

As per the report, while Indian equities are considered expensive when compared to historical levels but the strong domestic retail and institutional investment flows will support high valuations.

(With ANI inputs)