Morgan Stanley has revised India’s GDP growth projection for the current fiscal year down to 6.3 percent from an earlier estimate of 6.7 percent, following a period of slow growth in the July-September quarter. The slowdown was attributed to declines in private consumption and capital expenditure, though private consumption slightly outperformed, growing by 6 percent compared to 5.4 percent for capex. The services sector showed resilience with a growth of 7.1 percent, while the industrial sector struggled at 3.9 percent, impacted by manufacturing and electricity challenges.
However, Morgan Stanley is optimistic about a recovery in the second half of FY25, forecasting an average GDP growth of 6.6 percent due to government spending, improved rural demand, and favorable financial conditions. High-frequency data from October and November suggest an uptick in economic activity, indicating that the previous quarter may have marked the lowest point in the downturn. Regarding monetary policy, the Reserve Bank of India is expected to maintain current interest rates, with inflation anticipated to decrease to 5-5.5 percent in the coming months. Morgan Stanley highlights the importance of government spending trends, agricultural performance, and domestic liquidity for sustained economic recovery.