According to global banking group Morgan Stanley, India’s economic growth is predicted to drop from 6.9% expected for FY2024 to 6.5% in the financial year (FY) 2025.”As for growth, it will continue to be robust. As of December 2023, GDP is projected to grow 6.5% despite decreasing from 7.7% in the first half of FY2024. In its most recent research report on the Indian economy, Morgan Stanley stated, “We expect GDP to average 6.9% in FY2024 and 6.5% in FY2025.”

The Monetary Policy Committee of the Reserve Bank of India has revised its GDP growth projections for FY 2025, bringing them down from 7.3% for FY24, which the National Statistical Office had predicted. Notably, the government increased its forecast for nominal GDP growth in the interim budget released on February 1 to 10.5% from 8.9% in 2023–2024 (without accounting for the inflation rate).

Regarding macro-stability, Morgan Stanley predicted that headline inflation would average 4.5% in FY2025 and 5.4% in FY2024, with a range-bound forecast of 5.0–5.2% in the first quarter of FY24, bolstered by a favourable base effect.

The current account deficit is anticipated to track at 1.2% of GDP in FY24 and 1.3% of GDP in FY25, remaining benign due to the strength of services exports and the decline in global commodity prices, particularly oils. Regarding monetary policy, Morgan Stanley stated, “In our base case, we build in a shallow rate cut cycle of 50 basis points from June 2024, even as we continue to remain vigilant of risks from stronger-than-expected growth (strong credit growth), which could postpone the rate easing cycle.”

Morgan Stanley reported that although macro stability is still comfortable and reflects strength in the fundamentals, domestic demand improved in January. “We continue to view the economy favourably. Worldwide events and the May 2024 elections pose risks, the statement read.

In January, domestic demand increased sequentially and YoY as it slowly increased to a three-month high. GST collections rose to Rs 1.7 lakh crore, the second-highest amount ever, growing 10.4% annually. At the same time, the Manufacturing PMI improved to 56.9, continuing to be expansionary since July 21. Regarding external demand, exports increased 3.1% in January compared to 1% in the previous month.