Morgan Stanley ups India's FY25 GDP forecast to 6.8%, foresees robust growth

Morgan Stanley, a global brokerage firm, has upgraded its forecast for India's Gross Domestic Product growth in the financial year 2024-25 to 6.8%, marking an increase from the earlier projection of 6.5%. This revision comes amidst a backdrop of sustained economic recovery and optimism in the Indian market.

The firm also revised its growth forecast for the ongoing financial year upwards to 7.9%, indicating a robust growth trajectory for the country. According to Morgan Stanley, India's GDP is expected to maintain its momentum, with an estimated growth rate of approximately seven per cent in the fourth quarter of FY24, ending in March 2024.

A key highlight of the revised forecast is the anticipation of a balanced growth pattern across various sectors, including rural-urban consumption and private-public capital expenditure, in FY25. This convergence is expected to contribute significantly to India's economic resilience and stability.

Furthermore, the brokerage firm foresees a favorable inflation outlook, with recent trends suggesting a decline in headline inflation. Factors such as softening food inflation and a reduction in core inflation due to improved supply chain dynamics are expected to support this trend. Additionally, Morgan Stanley predicts a gradual easing of monetary policy, driven by sustained traction in industrial and capital expenditure activities.

These optimistic revisions underscore India's economic strength and stability, positioning it favorably in the global market. Looking ahead, Morgan Stanley projects headline inflation to average 4.5% in FY25, down from 5.4% in FY24, while core inflation is anticipated to remain subdued at 4.1%.

However, despite the positive outlook, Morgan Stanley cautions against potential risks emanating from both global and domestic factors. Challenges such as slower-than-expected global growth, elevated commodity prices, and changes in global financial conditions could pose threats to India's growth trajectory and macroeconomic stability. Domestically, factors such as central elections and shifts in the policy landscape warrant careful monitoring to mitigate potential risks and uncertainties.