Tax Reforms, Energy Transition, FTAs Key for 2025: Morgan Stanley

Ira Singh
Khabar Khabaron Ki,29 Dec’24

In its latest outlook, international brokerage Morgan Stanley reportedly outlined key priorities for the Indian government in 2025, emphasizing tax reforms, energy transition, and advancing free trade agreements (FTAs) as critical areas of focus. The firm anticipates robust growth signals in the months ahead, buoyed by heightened capital market activity and significant global developments.

Fiscal Priorities and Tax Reforms
Morgan Stanley highlighted the need to bring India’s primary fiscal deficit to zero in the first quarter of the next calendar year. The next wave of reforms, according to the brokerage, should prioritize restructuring the Goods and Services Tax (GST) rates and implementing direct tax reforms. These changes, aimed at enhancing fiscal efficiency and improving compliance, would be instrumental in sustaining long-term economic growth.

Infrastructure and Energy Transition
A renewed push for infrastructure spending and a sharper focus on energy transition were also underscored. With global attention increasingly shifting towards clean energy solutions, India’s strategic pivot towards renewable energy could further strengthen its position on the global stage. Morgan Stanley noted that if U.S. President-elect Donald Trump’s proposed tariffs are implemented, it could necessitate accelerating FTAs to safeguard India’s trade interests.

Corporate Earnings Outlook
The brokerage expects an earnings upswing in the October-December quarter, driven by increased government spending, a bustling wedding season, and a strong summer. For FY25, these factors, combined with a reduction in earnings estimates in recent weeks, are likely to contribute to a favorable corporate earnings landscape, believe experts.

Capital Market Dynamics
Amid persistent selling pressure in domestic markets, India’s equity market performance has demonstrated a declining correlation with global equities, falling below historical levels. This divergence, according to Morgan Stanley, reflects India’s growing resilience and unique market dynamics.

Outlook for 2025
As India navigates a dynamic global environment, Morgan Stanley’s recommendations highlight the importance of policy action and reforms in ensuring sustained growth. By prioritizing tax restructuring, advancing its energy agenda, and fostering new trade agreements, the government can position India as a key player in the evolving global economy.