India is poised to outperform Asian economies in private capital expenditure, driven by recent policy reforms, according to Chetan Ahya, managing director and chief Asia economist at Morgan Stanley. He added that India's relatively lower exposure to global trade could also help shield its economy from external shocks.
India's monetary policy was on the right track, Ahya further said. He lauded the Reserve Bank of India's decision to cut interest rates by 50 basis points in contrast to Morgan Stanley's expectations. More rate cuts were expected, he said in an interview to NDTV Profit.
The RBI reduced the benchmark repo rate by 50 basis points to 5.5% in its June policy meeting and changed its policy stance to 'neutral'.
The RBI could go for another 25 bps rate cut in the current cycle if the US Federal Reserve gives dovish cues, Enam Holdings Investment Director Sridhar Sivaram said last Thursday. He sees India's inflation to range at 2.5–2.75% in the second and third quarters.
Chetan Ahya, managing director and chief Asia economist at Morgan Stanley, was speaking to NDTV Profit Executive Editor Niraj Shah.
Chetan Ahya, managing director and chief Asia economist at Morgan Stanley, was speaking to NDTV Profit Executive Editor Niraj Shah.
India's capital expenditure is growing around 35% on an average, which is pretty strong. The government has room to do more as oil prices have fallen, giving a chance to increase excise tax revenue, he said.
Nevertheless, India will face some downsides in private capex as goods exports slow down.
Monitor Trade Tension Impact On Asia
Morgan Stanley recommends closely monitoring the impact of ongoing trade tensions on corporate capital expenditure and regional economic growth, as their effects are still unfolding, Ahya said.
Hard data points are holding up as of now. In 2018–2019, initially, as tariffs were being imposed, there was no impact on trade numbers or capital expenditure numbers. After five months, the impact started to come through. Morgan Stanley is building the same projection case for its growth forecast in this cycle as well, he said.
It will be difficult for every corporate to offset the growth slowdown, expected from a decline in private capital expenditure and trade tension, he said.
Asian economies will likely find it difficult to deal with the situation, and their growth could be hit. They could take domestic demand stimulus, which could come from both fiscal and monetary policies. The good news on monetary policy is that the US dollar is weakening, which is opening the space for Asian central banks to cut their interest rates, Ahya said.
Governments across Asia may need to introduce fiscal stimulus measures to counter the effects of trade tensions, but there are challenges to this, he said. He noted that post-Covid, public debt-to-GDP ratios had shot up and fiscal deficits had widened, making policy-makers hesitant to pursue fiscal expansion. Hence, more steps should come from the monetary sides, he said.
RECOMMENDED FOR YOU
Global Uncertainties Affecting Private Capex; Industries Will Cheer US-India Deal, Rajiv Memani Says
Jul 06, 2025
GST 2.0: Major Overhaul On The Horizon As India's Landmark Tax Turns 8
Jun 30, 2025
Markets Set To Rise Despite Global Risks, Says Morgan Stanley
Jun 27, 2025
India Has Morgan Stanley's Top Weightage In Asia — Here's Why
Jun 04, 2025
POPULAR