In its recently released “2024 India Economics Outlook,” Morgan Stanley Research predicts that India’s economy will experience substantial growth, hovering around 6.5% for both FY2024 and FY2025. The investment bank attributes this positive outlook to the country’s resilient domestic fundamentals, strong corporate and financial sector balance sheets, and the impact of recent policy reforms.
Factors Driving Growth:
- Morgan Stanley highlights the resilience of India’s economy amid global uncertainties.
- Strong corporate and financial sector balance sheets contribute to the positive outlook.
- Policy reforms have a positive impact on the economic landscape.
Domestic Demand as Growth Engine:
- The research emphasizes that domestic demand, supported by robust factors, will play a crucial role in sustaining India’s growth trajectory.
- This is seen as particularly significant in the face of challenges in the global economic landscape.
- Geopolitical tensions in Israel raise concerns about potential impacts on oil prices.
- Potential effects on India’s inflation, import bills, fiscal deficit, and trade balance are areas of consideration.
Alignment with Other Assessments:
- Moody’s Investor Service maintains India’s growth at 6.7% for 2023, applauding the country’s resilience.
- The International Monetary Fund (IMF) revises its growth projection for India to 6.3% for 2023-24.
- The Reserve Bank of India (RBI) estimates a growth rate of 6.5% for FY24.
Inflation and Fiscal Projections:
- Morgan Stanley expects headline inflation to moderate to 4.9% in FY2025 from 5.4% in FY2024.
- The report anticipates the current account deficit to remain in the range of 1.5-1.7% of GDP in FY2025-26.
Global Recognition and Inflows:
- Inclusion of Indian bonds in JPMorgan’s emerging market debt index from June 2024 is expected to attract more foreign inflows.
- This is anticipated to enhance the balance of payments for the country.
Monetary Policy Expectations:
- The report suggests that the RBI is likely to maintain interest rates until the first half of 2024.
- A potential shallow rate cut cycle from June 2024 is contingent on sustained moderation in inflation.