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Building in higher oil prices and slower global growth, Morgan Stanley has trimed India's gross domestic product (GDP) growth forecasts to 7.6% for F2023 and to 6.7% for F2024. Even as the global brokerage expects the cyclical recovery trend to continue, therefore expecting it to be softer than previously projected.

Slower global growth, adverse terms of trade shock, and impact on business confidence from geopolitical tensions weigh on the near-term outlook, as per the brokerage. 

“Our global economics team expects global growth to average 2.9% YoY in 2022 slowing from 6.2% growth in CY21. Against this backdrop, we lower our forecasts of India's GDP growth to 7.6% for F2023(from 7.9%) and 6.7% for F2024 (from 7%)," the note stated.

Morgan Stanley expects support from the government's supply-side response and the reopening vibrancy to help counter the downside. It also expects reopening vibrancy to help the informal sector, in turn supporting consumption growth, which has been a laggard. 

“The government's policy reforms, plus expansion of public infrastructure spending alongside an increase in capacity utilization levels, should help private capex to recover in 6-9 months," it said.

Further, a slowdown in global growth, higher commodity prices,and potential risk aversion in global capital markets expose India to downside risks. The key channels of impact will likely be higher inflation, weaker consumer demand, tighter financial conditions, the adverse impact on business sentiment,and a delay in capex recovery,as per Morgan Stanley. 

On the other hand, a positive resolution of geopolitical tensions and decline in global commodity prices would improve the domestic and external demand outlook, it added.

 

 

 

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