Morgan Stanley has warned that India’s economy must grow at a remarkable 12.2% annually to adequately address its underemployment crisis and absorb the influx of 84 million workers expected over the next decade. Without such rapid expansion, millions of young Indians risk remaining outside the formal workforce, potentially fueling social tensions.
Despite India’s economy growing 7.8% in the first quarter of FY26 outperforming expectations Morgan Stanley notes that this pace is insufficient to resolve the country’s job challenges. The report highlighted persistent poverty as a drag on household consumption and stressed the need for stronger industrial and export growth, faster infrastructure development, and sweeping reforms to improve skills and the business climate.
“Failing to accelerate growth risks not only slowing India’s rise as a global economic engine but also intensifying outward migration pressures as H-1B visas become costlier,” the report stated.
Meanwhile, the Asian Development Bank (ADB) projects India’s GDP growth at 6.5% for FY26. Its September 2025 Asian Development Outlook (ADO) highlighted that while robust domestic demand and service exports supported a strong 7.8% Q1 growth, additional US tariffs on Indian exports are expected to slow growth in the second half of FY26 and into FY27. Net exports are likely to subtract from GDP growth more than initially forecast, although the overall impact will be cushioned by resilient services exports, increased trade with other countries, and supportive fiscal and monetary measures.
The ADB also flagged rising fiscal risks, projecting a higher fiscal deficit than the budgeted 4.4% of GDP due to reduced tax revenue growth, partly caused by GST cuts not accounted for in the original budget, while government spending levels remain unchanged.