India’s GDP Mix Is Changing — Here’s What Brokerages Are Flagging

Global brokerage firms Morgan Stanley and Nomura have issued a note on India's economy following the release of the First Advance Estimates that pegged fiscal 2026 real GDP growth at 7.4%, offering a cautiosly optimistic outlook on the country's fiscal health going forward.

While the headline figure highlights India’s robust expansion, brokerages have flagged a distinct shift in the economy's drivers.

Morgan Stanley, for its part, has maintained a bullish stance on Indian economy, predicting that actual growth could ultimately exceed the government's 7.4% projection.

The firm has also pointed out high-frequency indicators since September 2025 as evidence of the economy's underlying strength.

Morgan Stanley further noted that consumption growth may slow during the second half of FY26, with capital expenditure set to become the more dominant theme.

The brokerage views the government's estimate—which implies a dip to 6.9% growth in the second half—as conservative. Therefore, it believes that policy impetus will sustain investment cycles even as consumer demand softens.

Nomura, on the other hand, offered a broader fiscal picture, highlighting the sharp deceleration in the nominal GDP growth to roughly 8% - a trend that has been driven by weaker GDP deflator.

The brokerage firm believes this is 'neutral' ahead of the upcoming Union Budget but warned it confirms a clear moderation led by softer consumption.

What does this mean? Both Morgan Stanley and Nomura are effectively expection consumption-led growth in the Indian economy to slow down during the second half of FY26.

As for FY27, Nomura remains positive on India's growth trajectory, forecasting 7.1% growth. The firm cited lagged policy easing, low inflation and stable global growth as key catalysts for the Indian economy, in addition to potential easing of US trade tensions, which could provide a further tailwind for Indian exports.