India at the Start of ‘Long Wave Boom’, China’s May Be Ending Soon: Morgan Stanley
In a significant economic analysis, foreign broking firm Morgan Stanley has drawn attention to India’s burgeoning potential, suggesting it is at the cusp of a “long wave boom.” At the same time, the report highlights concerns over China’s economic growth as its boom period may be coming to an end. Morgan Stanley has accordingly upgraded its rating on India to “overweight” while downgrading China to “underweight.”
One of the key indicators mentioned in the report is the GDP per capita, which measures a country’s economic output per person. With India’s GDP per capita at $2,500, significantly lower than China’s $12,700, the report suggests that India has ample room for growth and is poised to outperform other emerging markets.
Another notable difference lies in the household debt-to-GDP ratio, a crucial indicator of an economy’s health. India’s household debt-to-GDP ratio stands at 19 percent, while China’s is much higher at 48 percent. This discrepancy implies that India is in a better position to navigate economic challenges and sustain growth.
The report highlights the resilience of India’s manufacturing and services Purchasing Managers’ Index (PMI) since the easing of Covid restrictions. In contrast, China has experienced a rapid decline in its PMI. This data underscores India’s ability to recover and sustain economic momentum despite the pandemic’s impact.
Morgan Stanley’s equity strategist, Jonathan Garner, and his team visited India in June, leading to the firm’s decision to upgrade India’s rating to “overweight” and downgrade China’s rating to “underweight.”
India’s growing prominence in the global geopolitical arena is another factor contributing to its positive outlook. The country’s involvement in the Quad political framework with the US, Australia, and Japan, along with increased inward foreign direct investments (FDI) from various countries, positions India favorably in a multi-polar world. In contrast, China is grappling with pressures from the US, including plans to limit US technology investments in China.
Despite the positive outlook, Morgan Stanley cautions about potential downside risks, such as unexpected inflation surges and changes in monetary policies. The impact of artificial intelligence on India’s services exports and labor force also requires careful monitoring.
Nevertheless, macro indicators in India remain robust, and the economy is on track to achieve a 6.2 percent GDP forecast. Forward EPS (earnings per share) is also trending higher in a structural manner, bolstered by favorable demographics, improved labor productivity, and the dynamics of a multi-polar world.
Overall, India’s economic trajectory appears promising, while China faces challenges that may impact its growth outlook. As investors and market participants closely observe these trends, Morgan Stanley’s report sheds light on the evolving economic landscape of the two Asian giants.
