India's GDP to grow 6.5% in FY24, FY25: Morgan Stanley
Morgan Stanley Research on Monday 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.
