Morgan Stanley has an optimistic outlook on India's economic growth, emphasizing the country's strength and stability as key features of the current cycle. The firm predicts a convergence in gaps between rural-urban consumption and private-public capital expenditure, indicating a broader growth momentum across different sectors. Additionally, a shallow easing cycle in monetary policy is expected to continue, backed by sustained traction in industrial and capital expenditure activities.
In terms of inflation, Morgan Stanley foresees a positive trajectory with a projected average of 4.5 per cent for headline inflation in FY25, lower than the previous year, and core inflation expected to remain subdued at 4.1 per cent. Factors like supply chain normalization and easing commodity price pressures are seen as contributing to a disinflation trend. These projections indicate a favorable economic environment for India moving forward.
Despite the positive economic forecast, Morgan Stanley also highlights potential risks from both global and domestic factors that could impact India's growth and macroeconomic stability. Risks such as slower global growth, elevated commodity prices, and changes in global financial conditions could pose challenges. Domestically, factors like upcoming central elections and shifts in the policy mix are identified as elements needing close monitoring to navigate potential uncertainties.