India And SEA Nations to Drive Asia's Growth: Morgan Stanley

India, along with Southeast Asian countries such as Indonesia, is expected to sustain growth in the Asia region in the medium term, replacing China as the primary growth driver, according to Morgan Stanley and Nomura in separate reports released on Monday.

While Morgan Stanley forecasted 6.2 percent GDP growth for India in fiscal year 24 (FY24), Nomura forecasted 5.9 percent growth in 2023.

"Even with a slowing China, we expect Asian GDP growth to outperform other emerging markets and the US in the long run." This decade, India and Southeast Asia are expected to have the fastest-growing economies. "Asia's flying geese model is back in action," according to Nomura in a global markets research report.

Morgan Stanley stated in its global economics mid-year outlook, "China's recovery should support regional strength on a cyclical basis, but medium-term strength comes from India and Indonesia." Other emerging markets are expected to remain subdued, though we expect most economies to improve in 2024 as real rates fall and domestic demand recovers."

According to Morgan Stanley, India's recovery is being fueled by a combination of cyclical and structural tailwinds such as stronger balance sheets, improved macro stability, and broad-based increases in consumption and capital formation.

Based on the report, high-frequency data show a broad-based recovery, with real credit growth of 12.6%, real GST collections of 8.8%, services PMI at a 13-year high, and services exports tracking at an all-time high.