Morgan Stanley lifts India’s GDP growth forecast for FY25 to 6.8%, expects favourable inflation trajectory

  • Morgan Stanley also revises its growth forecast for the current financial year (FY24) to 7.9 per cent

Livemint
First Published27 Mar 2024
Morgan Stanley said that it anticipates a favourable inflation trajectory, with recent trends indicating a softening in headline inflation.
Morgan Stanley said that it anticipates a favourable inflation trajectory, with recent trends indicating a softening in headline inflation.(REUTERS)

Highlighting India’s strength and stability as hallmarks of the current financial cycle, Morgan Stanley has raised its GDP (gross domestic product) growth forecast for the fiscalyear 2024-25 (FY25) to 6.8 per cent from its previous estimate of 6.5 per cent.

It also revised its growth forecast for the current financial year (FY24) to 7.9 per cent.

ALSO READ: Indian economy keeps its shine, with some red flags

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

The outlook for India's economic growth remains robust, with the expectation that growth will track around 7 per cent in the fourth quarter of the financial year 2023-24, said Morgan Stanley.

This growth momentum is expected to be broad-based, with the gaps between rural-urban consumption and private-public capital expenditure narrowing in FY25, it added.

Further, Morgan Stanley said that it anticipates a favourable inflation trajectory, with recent trends indicating a softening in headline inflation.

In FY25 the headline inflation could fall to 4.5 per cent from 5.4 per cent in FY24, while core inflation is projected to remain muted at 4.1 per cent, according to Morgan Stanley.

The firm also anticipates a continuation of supply-chain normalisation along with easing commodity price pressures, contributing to the disinflation trend.

Morgan Stanley also highlighted the potential risks stemming from global factors and domestic uncertainties.

ALSO READ: S&P Global raises India's FY25 GDP growth forecast to 6.8%

It said that slower-than-expected global growth, higher commodity prices, and tighter global financial conditions pose risks to India’s growth and macroeconomic stability. 

On Tuesday, the rating agency S&P Global raised India’s FY25 growth forecast to 6.8 per cent on the back of strong domestic demand and a pick-up in exports. It expects India's GDP growth to moderate in the coming fiscal year after better-than-expected 7.6 per cent growth in FY24.

“For Asian emerging market (EM) economies, we generally project robust growth, with India, Indonesia, the Philippines and Vietnam in the lead,” it said.

 

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