Morgan Stanley forecasts slowdown in India's GDP growth


Morgan Stanley forecasts slowdown in India's GDP growth

Morgan Stanley has lowered its forecasts for India's economic growth in the next two fiscal years, saying a global slowdown, surging oil prices and weak domestic demand would take a toll on the country.


The gross domestic product growth (GDP) will be 30 basis points (bps) lower than the previous estimates, i.e., 7.6 percent for fiscal 2023 and 6.7 percent for fiscal 2024. Both inflation and the country's current account deficit will likely get worse due to broad-based price pressures and record-high commodity prices.


Upasana Chachra, Morgan Stanley's Chief Economist for India, said, “The key channels of impact will likely be higher inflation, weaker consumer demand, tighter financial conditions, the adverse impact on business sentiment, and a delay in capex recovery.”


In a move to contain inflation, India's central bank raised its main lending rate off record lows at an off-cycle meeting earlier this month. Markets see the Reserve Bank of India hiking its key rates further in the coming months as inflation remains elevated.


The cut reflects a strong economic impact from the Russia-Ukraine conflict that has driven up crude prices, pushing retail inflation in India - the world's third-biggest oil importer - to its highest in 17 months. The country has also been importing oil from sanctions-hit Russia at discounted rates to ease some of the pressure from surging crude prices, which recently touched $139 a barrel.


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