Morgan Stanley lowers India’s GDP forecast to 7.2%

BENGALURU: Morgan Stanley slashed its forecast for India’s annual growth for this year to 7.2%, as dire financial conditions and a slowdown in global trade put pressure on major economies across the world.
The brokerage’s forecast, down from its previous projection of 7.6, comes after India’s economic growth in the first three months of 2022 at 4.1% at 4.1% is the lowest in a year. The revised target is in line with the vision of the Reserve Bank of India.
For the next year, Morgan Stanley expects annual GDP to reach 6.4%.
Global central banks have moved to sharply tighten monetary policies to curb rising inflation, raising concerns about a possible recession. The Reserve Bank of India also raised the key interest rate by 50 basis points last month.
India’s annual consumer inflation, which touched a multi-year high in the past few months, eased marginally to 7.01% in June. The brokerage expects further relief.
“With softening commodity prices and a sharp recovery in domestic food prices, we see an improvement in the inflation trajectory in the near-term,” Upasana Chachra, chief Indian economist at Morgan Stanley, said in a note on Sunday.
Chachra pegs the terminal repo rate at 6.5%, and expects it to reach it by April 2023. The central bank last month raised the rate to 4.9%.
“We expect that normalization in real rates will help maintain macro stability and provide a foundation for a sustainable growth recovery.”

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