Robust domestic demand driving India's growth, says Morgan Stanley

NEW DELHI: Investment banking firm Morgan Stanley citing strong domestic demand kept a positive forecast on India's growth. It expects India's GDP growth to reach 6.8 per cent in the ongoing fiscal year 2024-25 and 6.5 per cent in 2025-26.
The firm forecasted inflation to remain around 5 per cent in the second quarter, before reaching 4.1 per cent year-on-year in the second half of 2024.It predicts that retail inflation will maintain an average of 4.5 per cent, in the next fiscal year.
Additionally, it expects the current account deficit to stay favorable, backed by the robust performance of service exports, and stay within the policymakers' comfort range at 1-1.5 per cent of GDP in 2025-26. It expects key lending rates will be maintained at 6.5 per cent in future.
"This is on the back of a shallower and deferred rate cut cycle for the Fed on the global front and improving productivity growth, a rising investment rate and inflation tracking above the target of 4 per cent on the domestic front," said Morgan Stanley.
Inflation remains a primary worry for the members of the Reserve Bank of India's monetary policy committee as they consider adjusting their stance on key interest rates. According to the minutes of the recent monetary policy meeting, there were numerous references to uncertainties related to inflation.