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 rate at 4.1% in the first three months of 2022 to its lowest in a year. The revised target is in line with the vision of the Reserve Bank of India.
For next year, Morgan Stanley expects annual Gross Domestic Product To touch 6.4%.
Global central banks have stepped in to 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.”
The brokerage’s forecast, down from its previous projection of 7.6%, comes after India’s economic growth rate at 4.1% in the first three months of 2022 to its lowest in a year. The revised target is in line with the vision of the Reserve Bank of India.
For next year, Morgan Stanley expects annual Gross Domestic Product To touch 6.4%.
Global central banks have stepped in to 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.”