India’s GDP To Grow About 6.5% In FY24 And FY25: Morgan Stanley

New Delhi, Nov 13 (KNN) India’s economic growth is expected to be approximately 6.5% for FY2024 and FY2025, citing strong domestic fundamentals, said Morgan Stanley Research on Monday.

The research arm of the investment bank, in its 2024 India Economics Outlook, said the domestic demand supported by strength in corporate and financial sector balance sheets and the follow-through of policy reform measures will aid India's growth amid a global slowdown.

The latest forecast from Morgan Stanley comes amid an escalation of conflict in Israel that threatens to impact oil prices.

High oil prices not only increases inflation but also results in higher import bills, leading to higher fiscal deficit and balance of trade challenges, which impact the economy.

Recently, Moody's Investor Services retained India's economic growth at 6.7% for 2023, citing the country's remarkable resilience amid a global slowdown buoyed by solid domestic demand.

The International Monetary Fund (IMF) has also raised its 2023-24 growth projection for India, to 6.3% from its July estimate of 6.1%, citing stronger-than-expected consumption during Q1.

Morgan Stanley expects headline inflation to moderate to 4.9% in FY2025 from 5.4% in FY2024.

"On the external balance sheet side, we expect the current account deficit to remain in a range of 1.5-1.7% of GDP in F2025-26, steady terms of trade, and strength in net service exports," it said.

"India's inclusion in the GBI-EM index from Jun-24 will likely support the balance of payments by augmenting capital flows and thus aiding the funding profile," it added.

In September, JPMorgan Chase & Co. said it will add Indian government bonds to its benchmark emerging-market index from June 2024.

The inclusion of Indian bonds in JPMorgan's emerging market debt index is expected to bring in more foreign inflows into the country.

Meanwhile, Morgan Stanley expects India's central bank, The Reserve Bank of India (RBI), to keep interest rates steady till the first half of 2024.

"However, we maintain our expectation of a shallow rate cut cycle from June-24, driven by visibility of sustained moderation in inflation. We build in two rate cuts of 25bps each, which will keep real policy rates averaging at about 100bps in 2024," it said.

"Risks of a delayed start to the easing cycle could emerge from higher commodity prices (especially oil) pushing up inflation and/or tighter global financial conditions weighing on the currency and adversely impacting macro stability," it added.

(KNN Bureau)