India to grow faster than expected! Morgan Stanley lifts GDP forecast, here’s what it means for your portfolio

India’s economy is picking up steam—and foreign investors are sitting up and taking notice. Morgan Stanley has made a slight boost to its growth estimate, now forecasting GDP growth of 6.2 per cent in FY26 and 6.5 per cent in FY27. The upgrade is due to more resilient-than-anticipated domestic demand, a widespread rebound in urban consumption, and firm investment activity that’s offsetting global headwinds.

The report stated that receding US-China trade tensions will modestly boost external demand, but the real drive will be domestic. “Domestic demand trends will be the key driver of India’s growth momentum amid lingering uncertainty on the external front,” the brokerage said in its India outlook.

Capex, consumption and policy

– Morgan Stanley pointed to three key drivers fueling India’s economic growth:

– Capex-driven growth, with the household and government sectors leading the way, and private corporate capex slated to recover gradually.

– Broad-based consumption recovery, with city demand gathering speed and rural expenditure already robust.

– Policy continuity, with both monetary and fiscal levers being expected to be supportive. The RBI can consider a deeper easing cycle, while the government remains committed to its capex-based fiscal course. “Policy support is likely to continue through easier monetary policy while fiscal policy prioritises capex,” Morgan Stanley said.

What does this mean for investors?

The Reserve Bank of India (RBI), on its part, has estimated FY26 growth at 6.5 per cent, keeping with Morgan Stanley’s latest estimate. This consistency lends even more traction to the bullish story emerging around India’s economic outlook.

Bullish triggers stacking up

With robust macro buffers, a cooling inflation scenario, and healthier-than-expected results from major sectors, India might be headed for yet another multi-year bull trend. Such upgrades by global behemoths such as Morgan Stanley are expected to pull in more foreign inflows into Indian equities if corporate capex accelerates in the second half of FY26, say market experts.

As urban consumption picks up, rural demand remains robust, and policy support is given to infrastructure and growth, India is emerging as one of the clearest growth stories in a world turned uncertain. Morgan Stanley’s new forecast could be the signal the bulls have been waiting for.