Morgan Stanley Raises India GDP Growth Forecast to 6.8%

Morgan Stanley has increased its GDP growth forecast for India for the financial year 2024-25 (FY25) to 6.8%, up from the previous estimate of 6.5%. This revision reflects a positive outlook on India’s economic trajectory, emphasizing its strength and stability in the current cycle. The firm also revised its growth forecast for the ongoing financial year, FY24, to 7.9%.

Economic Outlook and Monetary Policy

• Optimistic Trajectory: Morgan Stanley anticipates a shallow easing cycle in monetary policy, driven by continued traction in industrial and capital expenditure activities.

Growth Projection

• Robust Growth Momentum: India’s GDP growth is expected to track around 7% in the fourth quarter of FY23-24 (QE Mar-24), with broad-based growth across rural-urban consumption and private-public capital expenditure.

Inflation Trends

• Favorable Inflation Trajectory: Recent trends indicate a softening in headline inflation, with moderation in food inflation and core inflation. The firm expects headline inflation to average 4.5% in FY25 and core inflation to remain muted at 4.1%.

Factors Affecting Growth

• Global and Domestic Risks: Morgan Stanley highlights potential risks from slower-than-expected global growth, higher commodity prices, and tighter global financial conditions. Domestically, factors such as central elections and changes in policy mix warrant close monitoring.

Supply Chain and Commodity Prices

• Disinflation Trend: Supply-chain normalization and easing commodity price pressures are expected to contribute to a disinflation trend in the coming period.