Synopsis: In 2026, India is projected by JPMorgan to grow 6–7 percent due to 2 percent inflation, strong domestic demand, and GST cuts, while China faces a cooling property market and weak consumption. India’s earnings growth is expected at 13–14 percent, making it a preferred growth market.
As Asia enters 2026, investors and policymakers alike are closely watching two of the region’s economic giants: India and China. Both countries have played pivotal roles in shaping Asia’s growth story, but their trajectories differ significantly. China’s economy is navigating structural challenges, including a cooling property market and softening domestic consumption, while India is emerging as a bright spot, fueled by strong domestic demand and policy support. Against this backdrop, JPMorgan Private Bank has highlighted the potential for India and China in the year ahead, raising questions about which economy will drive Asia’s growth.
China’s Growth
China’s 2025 economic performance was uneven. The first half of the year saw recovery in exports and equities, aided by easing U.S.–China tensions and enthusiasm for tech innovation. However, the second half revealed persistent challenges, including a cooling property market, weak household consumption, and slowing labor income growth. While policies remain moderately supportive, including fiscal expansion and liquidity measures, domestic demand is likely to stay soft in 2026.
To tackle excess industrial capacity, China implemented the “anti-involution” campaign, curbing price wars and encouraging orderly exits in low-utilization sectors. These measures have lifted market optimism but structural imbalances remain. Meanwhile, AI investment is emerging as a selective growth driver, with capital flowing into data centers, cloud infrastructure, and domestic semiconductors. In 2026, AI is expected to benefit specific sectors rather than broadly boosting GDP growth.
India’s Growth Story
Strong GDP Growth Outlook
India’s GDP is projected to grow 6–7 percent in 2026, supported by strong domestic demand and policy measures. Even with high tariffs under the 2025 Liberation Day measures, the economy is demonstrating resilience as production gradually shifts from China to India. JPMorgan highlights that even with global trade uncertainties and US tariffs, India’s economy continues to expand because a large part of its growth is domestically funded and consumed
Monetary Policy and Inflation
Inflation in India is at a 47-year low of around 2 percent, giving the Reserve Bank of India room to cut policy rates by 125 basis points from 6.5 percent to 5.25 percent. This supports domestic credit growth, household consumption, and overall economic activity.
Fiscal Measures and GST Cut
The government has introduced direct and indirect tax cuts, including GST adjustments, and continues to invest in large infrastructure projects nearing completion. These policies provide a strong multiplier effect on growth and corporate earnings.
Equity Market Opportunities and Valuation
India’s equity market underperformed much of 2025, creating a strong entry point for investors. The Nifty 50 trades at around 21 times forward earnings, above the Hang Seng’s 12.5 times. While India appears expensive on headline valuations, JPMorgan notes that India has historically traded above 20x earnings due to stronger growth, better governance, and lower macro risk. Corporate earnings are expected to accelerate to 13–14 percent in 2026, providing a favorable risk-reward setup.
Political Stability and Reform Momentum
Positive political developments, including Prime Minister Modi’s party winning key state elections, have reinforced reform agendas. These measures are expected to strengthen the business environment and attract domestic and foreign investment.
India’s outlook is further strengthened by improving trade relations with the US. Negotiations are underway to cut 50 percent import duties, and a potential US-India trade deal could act as a near-term catalyst. Even without trade tailwinds, JPMorgan emphasizes that India’s growth is increasingly self-sustaining, helped by production shifting away from China. Political stability and recent electoral wins have also ensured that reforms remain on track, improving long-term policy certainty.
Earnings Outlook
Corporate earnings growth is a major reason JPMorgan prefers India over China for 2026. The bank expects double-digit earnings growth for Indian companies, supported by operating leverage, stable margins, and improving credit conditions. India’s recent corporate earnings recovery has already attracted global funds back into the market, with the Nifty 50 briefly touching record highs before consolidating. This earnings visibility gives India a structural advantage over China, where profit growth remains uneven and policy-dependent.
Why is JPMorgan Rotating from China to India?
JPMorgan Private Bank has clearly stated that it prefers rotating from Chinese equities into Indian stocks. According to Timothy Fung, Head of Asia Equity Strategy at JPMorgan, India’s underperformance has created a favorable valuation entry point relative to its fundamentals. The bank is comfortable shifting away from China after its recent rally and believes India offers better long-term risk-adjusted returns. JPMorgan also notes that many global investors remain underweight India because they understand China better, which creates further upside potential.
According to JPMorgan, India is better positioned than China to lead Asia’s growth in 2026, especially from a long-term investment perspective. China may continue to offer short-term trading opportunities, but India stands out as a structural growth story driven by domestic demand, earnings momentum, reforms, and global supply chain shifts. For investors looking beyond cyclical rallies, JPMorgan clearly sees India as Asia’s most compelling long-term growth market.
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