3 min readMumbaiFeb 22, 2024 04:40 AM IST
Global banking group Morgan Stanley has said India’s economic growth is expected to slow down to 6.5 per cent in the financial year (FY) 2025 from 6.9 per cent forecast for FY2024.
“On growth, we expect GDP growth to remain healthy, and we are tracking December 2023 GDP at 6.5 per cent, even as it slows from 7.7 per cent in the first half of FY2024. We expect GDP to average 6.9 per cent in FY2024 and 6.5 per cent in FY2025,” Morgan Stanley said in its latest research report on the Indian economy.
The RBI’s Monetary Policy Committee recently projected a lower GDP growth of 7 per cent for FY 2025, down from 7.3 per cent projected by the National Statistical Office for FY24. Significantly, the government has projected higher a nominal GDP growth – without excluding the pace of inflation — of 10.5 per cent in the interim Budget presented on February 1 as against 8.9 per cent in 2023-24
“With regard to macro-stability, we anticipate headline inflation to remain range-bound around 5.0-5.2 per cent in first quarter of FY24, supported by favourable base effect, and average 5.4 per cent in FY2024 and 4.5 per cent in FY2025,” Morgan Stanley said.
The current account deficit is likely to remain benign, supported by strength in services exports and softening global commodity prices, especially oil, and track at 1.2 per cent of GDP in F24 and 1.3 per cent of GDP in FY25. “On monetary policy, we build in a shallow rate cut cycle of 50 basis points from June 2024, in our base case, even as we continue to remain watchful of risks from stronger-than-expected growth (strong credit growth), which could defer the rate easing cycle,” Morgan Stanley said.
Morgan Stanley said domestic demand improved in January, while macro stability remains comfortable, reflecting strength in the fundamentals. “We maintain our constructive outlook on the economy. Risks emanate from global factors and elections in May 2024,” it said.
Domestic demand gathered pace on a YoY basis in January, as it inched up to a 3-month high, and also accelerated on a sequential basis. GST collections rose to their 2nd-highest to Rs 1.7 lakh crore, growing 10.4 per cent year-on-year, while Manufacturing PMI improved to 56.9, remaining expansionary since Jul-21. On the external demand front, exports grew 3.1 per cent in January from 1 per cent in the previous month.
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CPI inflation edged down to a 3-month low of 5.1 per cent in January from 5.7 per cent in December, while core inflation, continued to remain benign, as it slowed further to 3.6 per cent. WPI moderated to 0.3 per cent YoY in January from 0.7 per cent in the previous month.
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