While the global economy is in the midst of widespread deceleration, weighed down by a slowdown in the U.S., India has emerged as a bright spot set to deliver the world’s highest growth rate over the next two years.
Demographic shifts, a swell of government spending on technological and physical infrastructure, and efforts to own entire value chains to innovate and scale in critical industries are all contributing to the positive outlook for India. These themes were on display at India Investment Forum 2025, Morgan Stanley’s annual gathering of companies, investors, policymakers and thought leaders. Executives from close to 100 corporates and hundreds of investors from India and globally spent two days discussing emerging trends and opportunities in sectors including financial services, deep technology, biotechnology and electronics.
“Global uncertainty is providing investors with an opportunity to buy India’s long-term story as the country moves through a decade of record growth, supported by strong macro stability with improving terms of trade, a declining primary deficit and controlled inflation,” says Ridham Desai, Morgan Stanley’s Chief Equity Strategist for India.
Frugal Innovation
An executive of a cancer diagnostics company using machine learning models for early cancer detection noted that the U.S. has an “enviable” ecosystem of innovation, supported by dollar-value capital flows, patent protections and the availability of grants to support technology development. However, he explained, the absence of such infrastructure in India has catalyzed “jugaad,” a form of frugal and adaptive innovation with the potential to fuel breakthroughs. These could translate into novel technological inventions and the formation of new industries, with significant impact for the country as a whole in terms of employment and wealth creation.
Policy Changes Drive Space Tech
Jugaad was in evidence as India’s burgeoning space program put the world on notice by effecting high-value missions to the moon and Mars at a fraction of the cost of longer-standing U.S. and Russian programs.
India’s growing space industry is one of the areas that demonstrates how the country is evolving from simply being an assembly point to owning the full value chain to bring scale and output that may rival, and perhaps out-innovate, incumbents in 3-D printing, rocket development and satellite technologies.
According to one aerospace executive, policy changes allowing for the development of a private space industry and opportunities for private-public partnership have bolstered a cycle of capital flow and innovation. And just as NASA’s drive to push forward space exploration led to the invention of dozens of products—including camera phones, laptop computers, and even athletic shoes and baby formula—India’s deep tech breakthroughs could result in a similar cascade of benefits.
Opportunities in a Global Growth Haven
Morgan Stanley economists have forecast India to be the fastest-growing economy in the near future, with GDP expansion of 5.9% in 2025 and 6.4% in 2026, after growth of 6.2% last year. Though uncertainty from external factors will remain, strong domestic demand will provide essential momentum to keep India’s large, diverse economy on track to become the world’s fourth-largest this year.
Meanwhile, a number of factors further reinforce India’s growth story: easier monetary policy from the Reserve Bank; well-controlled inflation; and government efforts aimed at longer-term structural support and flexibility to step in with spending to bolster the economy if required in the near term.
While investors have been concerned about valuations and the ability of equities to sustain earnings-per-share (EPS) and return-on-equity (ROE) growth, the macro backdrop and policy support should make India a standout.
“As well, an emerging cycle of capital spending by the private sector, increasing appetite for debt financing and robust discretionary spending should result in mid-to high-teens earnings growth annually over the next five years,” says Desai.
