Morgan Stanley  |  Photo Credit: iStock Images
- Morgan Stanley sees private capex recovery in in next 12 months
- Morgan Stanley expects policy rate hikes from 4Q21 onwards
Mumbai: Morgan Stanley raised GDP growth estimates 200bp for F22 and 50bp for F23 in view of supportive policy mix and synchronous recovery in domestic and external demand. They believe the recovery has more legs and India is on the cusp of a virtuous growth cycle. They also expect policy rate hikes to start from 4Q21.
Morgan Stanley believes that the economy is at an inflection point that marks the start of a new virtuous growth cycle. They upgrade estimates of India’s GDP growth to 12.1 per cent for F22(from 10.1 per cent) and 6.7 per cent for F23(from 6.2 per cent). On a quarterly basis, they expect growth to accelerate to 6 per cent in the quarter ending March 2022(vs.5.4 per cent previously).
Here are the key highlights of the rationale for the increase in GDP forecasts
• Raise GDP growth forecasts for FY22 by 200 bps from 10.1 per cent to 12.1 per cent.
• Raise GDP growth forecasts for FY23 by 50 bps from 6.2 per cent to 6.7 per cent.
• Expect policy rate hikes from 4Q21 onwards.
• Triggers: Supportive policy mix & recovery in domestic & external demand.
• Monetary policy stance is accommodative.
• Fiscal policy is growth supportive.
• Expect support from synchronous global recovery.
• See private capex recovery in in next 12 months.
• Demand improving, corporate balance sheets repaired & improving banking sector.
On the flip side, the key risk could stem from COVID-19 related factors such as a resurgence in cases, mutation in the virus and issues with efficacy and distribution of vaccines.
With the improving growth trend, they project a slow-paced withdrawal of the monetary accommodation with a first lift in rates in 4Q21.