February 28, 2021

Morgan Stanley raises India’s GDP growth forecast

Morgan Stanley & nbsp | & nbsp Photo credit: & nbspiStock Images

Key Highlights

  • Morgan Stanley sees a private Capex recovery in the next 12 months
  • Morgan Stanley expects policy rate hike from 4Q21 first

Mumbai: Morgan Stanley raised GDP growth estimates by 200 ppm to F22 and 50 ppm to F23. They believe that recovery has more legs and that India is in the midst of a good growth cycle. They also expect the policy rate hike to start at 4Q21.

Morgan Stanley believes the economy is in an infiltration phase that marks the beginning of a new positive growth cycle. India’s GDP growth estimates improve to F.12 per cent (from 10.1 per cent) and F23 to 6.7 per cent (from 6.2 per cent). On a quarterly basis, they expect growth to increase to 6 percent for the quarter ended March 2022 (up from 5.4 percent previously).

Here are the main highlights of the rationale for the increase in GDP forecasts

Raise GDP growth forecasts for F FY22 from 10.1 percent to 12.1 percent by 200 bps.

Raise GDP growth forecasts for Y FY23 from 6.2 percent to 6.7 percent by 50 bps.

Expect a policy rate hike from Q 4Q21.

Ig Triggers: Support policy composition and recovery in domestic and external demand.

Policy accommodates monetary policy position.

Policy supports the development of monetary policy.

Syn can expect support from synchronous global recovery.

12 See private Capex recovery in the next 12 months.

Improvement Improving demand, adjusting corporate balances and improving the banking sector.

On the other hand, the main risk may arise from factors related to COVID-19, i.e. recurrence of cases, mutations in the virus and complications related to the effectiveness and distribution of vaccines.

With the growing trend, they plan to slow the withdrawal of monetary inns by first raising rates at 4Q21.