Morgan Stanley Cuts India Growth Estimates, Warns Of 'Worsening' Macros
Morgan Stanley cut its India growth estimate by 30 basis points for 2022-2023 and 2023-2024 on global headwinds.
American brokerage Morgan Stanley on Wednesday cut its India growth estimate by 30 basis points for 2022-2023 and 2023-2024 on global headwinds and warned that macro stability indicators like inflation are set to 'worsen' going ahead.
The brokerage expects India to clock a real GDP growth of 7.6% in the ongoing FY23, as against its earlier estimate of 7.9%, while the rate will slide further to 6.7% in FY24 as against the earlier expected 7%, it said.
Many analysts have been worried about the impact on the GDP growth as a result of the ongoing geopolitical events, which have fanned inflation and led central banks, including the RBI, to prioritise price rise overgrowth by hiking rates to cut demand in the economy.
"A slowdown in global growth, higher commodity prices, and potential risk aversion in global capital markets expose India to downside risks. The key channels of impact will likely be higher inflation, weaker consumer demand, tighter financial conditions, the adverse impact on business sentiment, and a delay in capex recovery," it said.
The brokerage said it expects support from the government's supply-side response and the reopening vibrancy to help counter the downside on the growth front.
It said the reopening vibrancy will benefit the informal sector and in turn, support the consumption story growth which has been a 'laggard', and private capital expenditure will recover in the next 6-9 months as the government's infra spending will increase the utilisation levels.
Stating that 'macro stability indicators (are set) to worsen', Morgan Stanley said it expects 'both inflation and the current account deficit to deteriorate'.
The retail inflation will average at 6.5% for FY23, as against the 6% upper band comfort available to the RBI, and the current account deficit will reach a ten-year high of 3.3% on the back of commodity price pressures.
The RBI will hike rates by 0.50% each at the June and the August reviews and take the repo at which it lends to be at 6% by December 2022.