India Preventing Global Growth From Slipping Into Recession, Says Market Veteran Ridham Desai

India is the reason why global growth is not slipping into recession.

That's the word coming in from Morgan Stanley's Ridham Desai, who believes that India remains relatively insulated from global uncertainty and is likely to contribute 20–25% of global growth over the next 12 months.

“In fact, if you ask me, actually on a multi quarter basis, I'll be far more worried about China than the US,” Desai told NDTV Profit in a televised interview. “India's exposure on the external front is largely in services. And there, I think there's a fair bit of strength that we are seeing. So I think the services export may continue to remain quite robust.”

Desai acknowledged that global conditions remain uncertain due to three key risks: tariff-related developments led by the US, slowing growth and deflation in China, and rising geopolitical tensions. However, he maintained that India's macro position is strong in comparison.

The comments came as India's economy grew 7.4% in the January–March quarter from a year earlier, driven by strong performance in the construction and manufacturing sectors. For the fiscal 2025, the economy expanded by 6.5%, in line with the government's earlier estimate.

In contrast, global growth projections have weakened. The International Monetary Fund expects the world economy to grow 2.8% this year, according to its latest World Economic Outlook. This would mark the slowest expansion since the Covid-19 pandemic and the second-lowest since 2009.

“India is measurably better than the rest of the world, and its growth is unlikely to slow down significantly,” he said. “India is not a small cap stock, it's a relatively large… it's actually going to be contributing to maybe 20, 25% of global growth in the next 12 months.”

Desai said that while some slowdown in growth is likely in the fiscal 2025-26 relative to the fourth quarter of the preceding fiscal, this follows what he called a bumper performance in the last quarter. He also said India's trade exposure to the US remains limited at about 2% of GDP, which reduces the direct macroeconomic impact from American policies.

“The US tariff issue will be behind us in maybe two quarters, but the China issue will linger much longer,” Desai said. “China is facing significant deflation pressures… and the tendency will be for China to export that weak pricing to the rest of the world, which will hurt Indian exporters in markets where we compete with China.”

China's economy expanded by 5.4% in the March quarter compared to the previous year, but continued deflationary pressures and soft export demand remain concerns. Meanwhile, the US economy contracted at a 0.2% annualised rate in the same period, according to preliminary estimates.

Corporate Earnings Recovery And Capex Outlook

On corporate earnings, Desai said India's Q4 performance came in better than expected, after analysts had trimmed their forecasts following a weak December quarter. He attributed the earlier slowdown to temporary fiscal compression due to elections and monsoon-related spending, which have since reversed.

“The fiscal deficit recovered, and so the government spending has recovered. Therefore, as a consequence, the fiscal deficit has recovered. Monetary policy has eased considerably,” he said. “India's domestic situation looks quite strong.”

Desai added that services exports could remain resilient even if US growth slows down, as American companies may outsource more to reduce costs and protect earnings. However, he cautioned that goods exports could be vulnerable.

“Clearly, companies that may have been investing for export markets may just wait for a little while,” he said. “Private capex will probably be better than last year, but not ideal where we would ideally want it to be.”

Desai further said that while India is not completely shielded from global uncertainty, it remains on stronger footing than many other economies and is likely to remain a key driver of global growth in the near term.