Morgan Stanley Forecasts Robust 6.5% Growth for India’s Economy in FY24 and FY25

Morgan Stanley Research on Monday (13th Nov 2023) forecasted a 6.5% economic growth for India in FY24 and FY25, attributing this growth to solid domestic fundamentals.

* The 2024 India Economics Outlook report emphasizes that strong domestic demand, bolstered by healthy corporate and financial sector balance sheets and policy reforms, will contribute to India's growth despite a global slowdown.

* This forecast comes as the intensifying conflict in Israel may affect oil prices, potentially influencing inflation and fiscal deficits.

Comparisons with other growth projections :

* The projection by Morgan Stanley aligns with the Reserve Bank of India's (RBI) estimation of 6.5% growth for FY24.
* In comparison, Moody's Investor Services recently maintained India's economic growth at 6.7% for FY24, noting impressive resilience in the face of a global slowdown due to solid domestic demand.
* The International Monetary Fund (IMF) also increased its FY24 growth forecast for India to 6.3% from its July forecast of 6.1%, based on better-than-anticipated consumption during Q1.

Inflation and interest rates outlook :

* Morgan Stanley anticipates headline inflation to decrease from 5.4% in FY24 to 4.9% in FY25.
* The research firm expects the RBI to maintain steady interest rates until the first half of 2024, followed by a gradual rate cut cycle starting from June 24 as a result of continued moderation in inflation.
* They foresee two rate cuts of 25 basis points each, keeping real policy rates averaging around 100 basis points in 2024.

Factors affecting growth and stability :

* The report indicates that a robust political mandate backing reform measures and enhanced external demand could lead to accelerated growth in India.
* However, potential risks include a delay in the capex cycle due to diminished business confidence from unexpected political outcomes or external environmental factors.
* Morgan Stanley also predicts an increase in private consumption growth, a resurgence in private capex, and stable export trends without impeding growth, assuming a well-balanced policy response..

Source : News Bytes App