In a recent report released on Wednesday, Morgan Stanley Research projected a moderation in India's GDP growth for the financial year 2024-25 to 6.5%, down from the 6.9% projection for FY24. This assessment comes amidst a backdrop of varying economic indicators and emerging trends in key sectors.
Aditi Nayar, Chief Economist and Head of Research & Outreach at ICRA Ltd said, "The year-on-year GDP growth is anticipated to moderate sequentially to 6% in Q3 FY24 from the previous 7.6%"
Nayar stated, "Lower volume growth for the industrial sector, flagging momentum in certain indicators of investment activity, a slowdown in government expenditure and an uneven monsoon are expected to dampen the GDP growth to 6 per cent in Q3 FY24 from 7.6 per cent in Q2 FY24."
Amidst these projections of moderation, Morgan Stanley Research maintained a constructive outlook on the Indian economy. In their report titled India Economics – Macro Indicators Chartbook: Strength in Growth, Stability in Macro-Fundamentals, they highlighted the resilience of domestic demand in January and the overall macroeconomic stability.
"We maintain our constructive outlook on the economy," stated Morgan Stanley Research, highlighting the strength in fundamentals and the improvement in domestic demand.
While the RBI Monetary Policy Committee recently revised its GDP growth projection for the financial year 2024-25 downward to 7%, a decrease from the 7.3% projected by the National Statistical Office for FY24. The government presented a contrasting outlook, forecasting a higher nominal GDP growth rate of 10.5% in the interim budget released on February 1. This projection includes the pace of inflation, contrasting with the 8.9% growth rate recorded in 2023-24.
Looking ahead, Morgan Stanley Research projected a healthy GDP growth of 6.5% for the third quarter of FY24 ending December 2023, albeit slower than the 7.7% witnessed in the first half of the current financial year. They also anticipated a current account deficit, buoyed by robust services exports and softening global commodity prices.
Meanwhile, the ICRA report pointed out a slowdown in investment activity during the third quarter of the current financial year. Government gross capital expenditure dipped slightly in October-December 2023, and the capital outlay and net lending of state governments also contracted.
ICRA's projections for the quarter ending December 2023 indicate a mixed performance across sectors. While agriculture, forestry, and fishing sector are expected to see minimal growth at 0.5%, the services sector is anticipated to fare better, particularly in trade, hotels, transport, communication, and related services.
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