Morgan Stanley raises India GDP growth forecast for FY25 to 6.8%

Painting a bullish picture on the growth momentum of the Indian economy, foreign brokerage Morgan Stanley has raised the country’s GDP growth forecast for FY’24-25 to 6.8 per cent from 6.5 per cent estimated earlier. 

The upward revision comes in the wake of continued traction in industrial and capex activity. 

For the current calendar year, India’s economy will grow at 6.8 per cent as against 6.4 per cent estimated earlier, Morgan Stanley Research said in a new research report titled ‘Building Stronger Recovery’. 

“We expect growth to be broad-based and the gaps between rural-urban consumption and private-public capex to narrow in 2024-25”, Upasana Chachra, Chief India Economist and Bani Gambhir, Economist wrote in this research report.

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For the current fiscal, Morgan Stanley sees GDP growth at robust 7.9 percent, much higher than government estimate of 7.6 per cent and closer to RBI expectation of around 8 per cent. For the ongoing fourth quarter this fiscal, Morgan Stanley sees GDP growth at 7 per cent with gross value added Growth of 6.7 per cent. 

Morgan Stanley expects CPI inflation to moderate to 4.5 per cent in 2024-25 and current account deficit will track around 1 per cent of GDP.


Noting that this cycle, like the 2003-07 one, has been marked by a pick up in capex, Morgan Stanley Research highlighted that the recovery in capex since the pandemic has been led by the government’s thrust for capital spending. 

While public capex spending remains strong, private capex, which has been on a weak footing for most of last 10 years, is also showing signs of recovery as the government’s push for infrastructure spending is improving the business environment and crowding in private investment.  “We expect capex trend to pick up in a sustained manner creating a virtuous cycle of growth. In our view, infra capex will grow at double digit levels over the next few years, supported by public and private capex spending”, the research report added.

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Capex spending in the economy likely to grow above nominal GDP in 2024-25 and 2025-26. The nascent signs of capex revival will become more broad based and sustain the uptrend, it added.


As the Reserve Bank of India gets visibility on gradual moderation in inflation towards 5 per cent and below, the central bank is expected to embark on a shallow rate cut cycle, according to Morgan Stanley Research. 

“We pencil in two rate cuts of 25 basis points each. However, we push the first cut forward from our earlier expectation of June to August/October,” the research report said.

The central bank will remain cautious and focus on maintaining real rates in positive territory for its domestic economy. 

“In our base case, we expect inflation to moderate and current account deficit to remain manageable. As well, our US team expects the Fed to cut rates from the June meeting”, the report said. 


Meanwhile, domestic demand growth has been steadfast and is a key driver of Morgan Stanley’s constructive outlook for the economy, they said, noting that consumption accounts for 60.3 per cent of GDP and is the mainstay of the domestic demand story. 

While private consumption has recovered over the last four quarters, with growth tracking at 3.5 per cent in December 2023 quarter vs 1.8 per cent in December 2022 quarter, the trend in private consumption is just catching up to the pre-pandemic trend.

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“We expect private consumption growth to recover further as it narrows the gap between rural and urban demand and between goods and services,” the Morgan Stanley report added.

Risks to these economic growth forecasts stem from global factors more than domestic. On the external side, slower-than-expected global growth, higher commodity prices and/or tighter global financial condition pose growth and macro-stability risks. On the domestic side, central elections and changes in policy mix need to be tracked.


With global growth expected to slow a tad to 2.8 per cent in 2024 and remain steady at 2.9 per cent in 2025 (from 3.2 per cent in 2023), Morgan Stanley expects the export trend to stabilise and not be a further drag on growth. 

“In the medium term, we estimate an increase in export market share as India benefits from supply-chain diversification and policy measures supporting manufacturing. As such, we expect that export market share (goods and services) will increase from 2.4 percent currently to 4.5 per cent by 2031,” said the research report.

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