Global brokerage house Morgan Stanley has slashed its forecast for India’s economic growth for the next two financial years. Brokerage house Morgan Stanley says the global slowdown, rising oil prices and weak domestic demand will impact Asia’s third-largest economy.
30 basis points reduction in earlier estimates
The brokerage house said in a note that India’s Gross Domestic Product (GDP) growth for FY2023 will be 7.6 per cent and for FY2024 will be 6.7 per cent. Morgan Stanley has cut its previous forecast for India’s economic growth by 30 basis points. The report said that due to Russia-Ukraine conflict, crude prices have risen, which has increased retail inflation in India. Retail inflation in India has reached a 17-month high.
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Price pressure and high commodity prices are increasing the difficulties
Upasana Chhachra, Chief Economist, Morgan Stanley in India, says that with higher inflation, there could be effects like weak consumer demand, tight financial conditions, adverse impact on business sentiments and delay in capex recovery. They say that both inflation and the country’s current account deficit could worsen conditions due to price pressure and record high commodity prices. For some relief from rising crude prices, India has been importing oil from Russia at discounted rates.
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India meets around 80 per cent of its oil requirement through imports and rising crude prices have exacerbated the country’s trade and current account deficits. Also, it is impacting the rupee and imported inflation is picking up.