With growth stabilising and inflation expected to firm up moderately, Ahya sees room for India’s nominal GDP growth to move back toward the 10–10.5% range in FY27.
Real GDP growth across the region peaked early and slowed through the year. Nominal GDP followed a similar trajectory as trade and inflation cooled. But once trade agreements started falling into place around October, the trend began to reverse. Non-tech exports, in particular, showed signs of improvement.
The key point, Ahya stressed, is that tariffs did matter — they hurt trade and growth — but the eventual clarity and rollback prevented a deeper slowdown.
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Turning to inflation, Ahya outlined three clear factors that had kept price pressures in check in India.
First, domestic demand had weakened. Discretionary consumption — including auto sales — softened, and earnings growth came in below earlier expectations. That cooling in demand helped keep inflation contained.
Second, the global industrial cycle slowed sharply. Trade volumes fell, industrial production dipped, and global commodity pressures eased. That weakness fed into India’s inflation trajectory.
Third, China’s persistent producer price deflation played a significant role. Given India’s trade exposure to China across several industrial segments, falling Chinese prices transmitted disinflationary pressure into India’s wholesale and consumer price indices.
Now, however, those forces are beginning to turn.
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Ahya believes the big picture on tariffs is now clearer. “Tariffs have now peaked,” he said, adding that this added certainty should support the recovery in non-tech exports across Asia, including India.
While markets may be tempted to pencil in higher growth numbers, Morgan Stanley is not rushing to tweak forecasts just yet. The base case already assumed that trade deals would fall into place over time. With that largely playing out, there’s no immediate reason to alter projections.
Ahya’s view is that the broader growth outlook for India remains intact. “Growth outlook is pretty much secure,” he said, even if there is some minor noise around potential country-specific actions under US trade laws.
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