Monday, June 5, 2023

GDP to expand 6.2% in FY24, RBI to lower rate in Q1 2024: Morgan Stanley.

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Morgan Stanley reported that India’s GDP will grow 6.2 percent in FY24 due to the economy’s full reopening last year, cyclical consumption rebound, increasing private sector capex, and government spending acceleration. The research also predicted India’s second-quarter 2024 inflation will be below 5%.

Morgan Stanley believes that increased capex will boost domestic demand by creating more employment and starting a cycle of increasing income, savings, and investment. March’s headline CPI was expected.

“We estimate inflation to drop more strongly in the quarter ending June, to below 5%, backed by positive base effect and decreasing commodity prices. April inflation is 4.7 percent YoY. Morgan Stanley predicted 5.5 percent inflation in F2024, with negative risks from falling commodity prices.

The Reserve Bank of India (RBI) predicts repo rate reduction in the first quarter of 2024 and a hold in 2023 due to low inflation.

Indeed, we expect inflation to dip below 5% in QE June and see negative risks to our F24 inflation prediction of 5.5 percent. “Based on an improving inflation outlook, we see risks of a shallow rate cut cycle starting earlier than 1Q24,” the research states.

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