India’s growth average 7%, strongest among largest economies: Morgan Stanley reports

The key change in India's structural story lies in a clear shift in policy focus toward lifting productive capacity of the economy

PGurus Newsdesk

August 11, 2022

The key change in India's structural story lies in a clear shift in policy focus toward lifting productive capacity of the economy

India to be the fastest-growing Asian economy in FY23, says Morgan Stanley

Morgan Stanley said in a report that over 2022-23, India’s growth will average 7 percent, the strongest among the largest economies, contributing 28 percent and 22 percent to Asian and global growth, respectively. India is best positioned within Asia to deliver domestic demand alpha. Its cyclical recovery will be sustained by structural factors.

“The recent strong run of data increases our confidence that India is well positioned to deliver domestic demand alpha, which will be particularly important as developed markets’ growth weakness percolates into Asia’s external demand,” Morgan Stanley said.

The biggest challenge that was emerging to India’s macro-outlook was the sharp spike in oil/ commodity prices weighing on macro stability.

“However, with the 23-37 percent decline in oil/ commodity prices since the March-22 peak, we think that macro stability indicators will head back towards the comfort zone. Against this backdrop, we project that the RBI does not need to lift rates deeply into restrictive territory. In other words, the RBI will not need to slow domestic demand growth meaningfully to control the macro stability indicators,” the report said.

The key change in India’s structural story lies in the clear shift in the policy focus toward lifting the productive capacity of the economy. Policymakers have taken up a series of reforms that will catalyze an upswing in the private CAPEX cycle, helping to unleash a powerful productivity dynamic, leading to the onset of a virtuous cycle.

Cyclically, the economy is lifting off after a prolonged period of adjustment. The corporate sector has delivered and the balance sheets of the financial sector have also been cleaned up. This backdrop of healthy balance sheets and rising corporate confidence bodes well for the outlook for business investment, the report said.

[With Inputs from IANS]

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