American brokerage firm Morgan Stanley has slashed India’s growth forecast by half a percentage point to 7.9 per cent for the fiscal year 2022-23. Along with this, Morgan Stanley has raised its forecast for retail inflation to 6 percent. It estimates that the country’s current account deficit (CAD) will increase to three percent of gross domestic product (GDP).
The Morgan Stanley report said, “We anticipate that the cycle of cyclical revival will continue, but it will be softer than our previous forecast. The current geopolitical tensions will increase external risks and push the economy towards stagnant inflation.
“India is being affected by three factors…higher crude oil and other commodity prices, trade and other tight financial conditions, etc., which are affecting business and investment sentiments,” the report said. “We are slashing our growth forecast for 2022-23 by half a percentage point to 7.9 percent due to higher crude oil prices,” Stanley said. In addition, the consumer price index-based inflation forecast is being raised to 6 per cent. The current account deficit could widen to 3 per cent of GDP, which would be a 10-year high.
The report said that India meets 85 percent of its crude oil requirement from imports. International crude oil prices have come down slightly after once reaching a 14-year high of $140 a barrel. India will have to pay more for crude oil. This will increase inflationary pressure.