Morgan Stanley, a global brokerage firm, has adjusted its GDP growth forecasts for India, foreseeing a stronger outlook for the financial year 2024-25 (FY25). The firm upgraded its GDP growth projection to 6.8%, up from the previous estimate of 6.5%. Additionally, for the ongoing financial year (FY24), Morgan Stanley revised its growth forecast upward to 7.9%.
The firm anticipates India’s GDP growth to maintain its resilience, with an expected growth rate of approximately seven percent in the fourth quarter of FY24, ending in March 2024. This growth momentum is expected to be broad-based, with diminishing gaps between rural and urban consumption patterns and between private and public capital expenditure in FY25.
Furthermore, Morgan Stanley predicts a favorable trajectory for inflation, noting recent trends indicating a decline in headline inflation. The softening of food inflation, along with a significant moderation in core inflation attributed to the easing of supply chain disruptions and subdued price pressures, is anticipated. The firm also anticipates a modest easing cycle in monetary policy, supported by sustained momentum in industrial and capital expenditure activities.
These revisions reflect Morgan Stanley’s optimistic stance on India’s economic trajectory, emphasizing the nation’s resilience and stability as prominent features of the current economic cycle. Looking forward, the firm forecasts headline inflation to average 4.5% in FY25, down from 5.4% in FY24, while core inflation is expected to remain muted at 4.1%. Supply chain normalization and a reduction in commodity prices are anticipated to contribute to the disinflationary trend.
However, despite the positive economic outlook, Morgan Stanley acknowledges potential risks stemming from global factors and domestic uncertainties. Risks to India’s growth and macroeconomic stability include slower global growth, higher commodity prices, and stricter global financial conditions. Domestically, events like central elections and changes in the policy mix warrant careful monitoring to assess their impact on the economic landscape.
