New Delhi– India’s macro balance sheet is well-positioned to support long-term expansion, aided by a robust policy framework, fiscal consolidation, and structural advantages such as demographics, Morgan Stanley said in a report on Thursday.
The brokerage expects India’s economy to grow at an average of 6.5 percent annually over the next 10 years, with inflation aligning to the Reserve Bank of India’s 4 percent target. This backdrop, it noted, would keep borrowing costs favorable and ensure debt sustainability.
“India’s overall indebtedness levels reflect an incipient inflexion with a rise in private sector leverage. We expect private sector debt to continue to see modest expansion while public sector debt decline keeps overall debt manageable and improves the productivity of incremental debt,” the report said.
It projected overall debt levels to remain contained between 157–158 percent of GDP over the next two years, even as the composition shifts toward more productive private-sector borrowing.
“A pickup in private sector capex may lead to a rise in corporate leverage, albeit at a modest level, while household leverage could also expand. Public sector debt should decline gradually with fiscal consolidation, even as spending quality remains skewed toward capex,” the report added.
Private sector debt has already risen to 76 percent of GDP in FY2025 from a trough of 73.9 percent in FY2024, while public sector debt has eased to 82 percent of GDP from 83.4 percent a year earlier.
Morgan Stanley also noted that the productivity of incremental debt has improved across sectors, with the public sector channeling more resources into infrastructure development. (Source: IANS)
