A basis point is one percent point of percentage point.
In a study on India’s economy and strategy, it said growth will drop to 5.7% in the December 2025 quarter, compared with 6.2% a year ago. “This reflects the uncertainty arising from changes in trade and tariff policies, which weigh against external demand and business sentiment, which hinder the capital expenditure cycle,” it said.
However, Morgan Stanley expects inflation to be benign, with inflation on average at 4% in the current fiscal year and trends are still decisively below 4% in the coming months. “We are seeing lower food inflation, lower oil prices, keeping food and non-food inflation at a benign level,” it said.
It said slower growth and lower inflation should be allowed to respond with a deeper slow cycle (100 basis points accumulated) and lower interest rates twice in 2025.
“A deeper below expectations downturn could lead to a more relaxed RBI and potentially suspend the consolidation of fiscal deficits, F2026,” the report said. “It added that if the U.S. is to reach a timely agreement with China, it could improve the growth trajectory by addressing the uncertainty caused by changes in tariff policy.
