Morgan Stanley has trimmed India’s economic growth forecast for the ongoing financial year and the next, considering sluggish global growth.
The growth outlook for the country’s gross domestic product (GDP) for fiscal 2022-23 has been slashed by 40 basis points to 7.2 percent, and for fiscal 2023-24, the brokerage firm cut down 30 basis points to 6.4 percent, according to a note.
“With the overall exports to GDP at 21 percent, a slower-than-expected global growth trend would delay India’s full-fledged growth recovery as external demand weakens sequentially,” Chief India Economist Upasana Chachra said.
“We see downside risks emanating from a weaker-than-expected global growth trend, supply-side-driven commodity price shock, and faster-than-warranted tightening of financial conditions.”
Given the recent slowdown in the price of commodities and food, the trajectory of near-term inflation will be lower than previously predicted.
Also Read: RBI Trims India’s FY 23 GDP Estimate To 7.2%
Central banks globally are tightening monetary policies to tame soaring inflation, raising concerns about a possible recession. The Reserve Bank of India, too, in June, raised the key interest rate by 50 bps.
India’s consumer-based inflation eased marginally to 7.01 percent in June. Morgan Stanley expects some relief ahead.
“We expect Consumer Price Index inflation to be just shy of the 6 percent mark from November 21 onwards. However, we highlight that risks to the same could emerge from unexpected changes in the food price trajectory,” Morgan Stanley added.
The brokerage sees CPI inflation to average 6.5 percent compared with 7 percent earlier in this fiscal year and keeps the CPI estimate at 5.3 percent for FY24.
It also anticipates the terminal policy repo rate to be at 6.5 percent d by April 2023, up from the current 4.9 percent.