Morgan Stanley, a leading global brokerage firm, has revised its forecast for India's GDP growth, projecting it to reach 6.8 percent in 2025, up from the previous estimate of 6.5 percent. This upward adjustment is attributed to the sustained momentum in industrial and capital expenditure activities.
The firm elaborated on its revised projections, stating, "We anticipate a year-on-year GDP growth of 6.8 percent in fiscal year 2025, marking a 30 basis points increase from our earlier projection of 6.5 percent, driven by the continued traction in industrial and capital expenditure activities. Furthermore, on a calendar year basis, we foresee a growth rate of 6.8 percent in 2024, up from the previous estimate of 6.4 percent."
Morgan Stanley also provided insights into the near-term growth prospects, stating, "We anticipate GDP growth to hover around 7 percent in the quarter ending March 2024, with Gross Value Added (GVA) growth projected at 6.3 percent, translating to a fiscal year 2024 GDP growth of 7.9 percent."
Expectations for the future were underscored by the brokerage's anticipation of a broad-based growth trajectory, with a narrowing gap between rural-urban consumption patterns and private-public capital expenditure in fiscal year 2025.
The firm emphasized the potential for prolonged expansion, driven by enhanced productivity growth, ensuring macroeconomic stability. Despite a moderating inflation trend and a favorable current account deficit, Morgan Stanley cautioned that the onset of a shallow easing cycle might be delayed until the third quarter of 2024, deviating from their previous outlook of the second quarter.
Morgan Stanley also highlighted potential risks to their projections, including the possibility of a delay or absence of easing measures due to better-than-expected trends in growth, capital expenditure, and productivity, which could necessitate higher neutral real rates.
Regarding domestic demand, the firm pointed out its steadfast nature and its pivotal role in shaping the positive economic outlook. With consumption contributing 60.3 percent to GDP, it remains a cornerstone of the domestic demand narrative. While private consumption has shown signs of recovery over the past four quarters, growing at 3.5 percent in the quarter ending December 2023 compared to 1.8 percent in December 2022, it is noted that private consumption trends are still catching up to pre-pandemic levels.
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