GDP growth rate estimated at 7.5%.
By Sreekanth A Nair
The Indian economy is showing signs of recovery and is expected to have a slow, but sustainable growth, according to Morgan Stanley. India is likely to achieve a GDP growth of 7.5 percent this fiscal, it said.
“We expect GDP growth (new series, on market prices) to accelerate gradually to 7.5 percent in the financial year 2016 and 8.1 percent in the fiscal year 2017,” Morgan Stanley said in a report.
A notable point is that the recovery will be based on the capital expenditure of the government than that of the private sector, urban consumption and normalization in exports.
“We expect a slightly slower pick-up in the growth trajectory, given the trailing weakness from external demand and concerns about agriculture growth, with related impact on rural consumption,” the report said.
According to Morgan Stanley, the inflation rate is likely to be under 5 percent for two years, which is also a positive sign.
Indian economy is moving out of macro adjustment phase, giving a clear indication of moving on to recovery phase. The policy actions of the government and the monetary policy decisions taken by the Reserve Bank of India (RBI) have led to the prosperous stage.
The report noted that this will be a “longer—duration expansion cycle for India with low risks of overheating in the next two years, considering the overall policy approach of the government and RBI“.
The report said the two key factors such as the pace of policy actions to revive productivity dynamics and improve the growth mix, and the strength of external demand recovery and trend in capital inflows into emerging markets will influence the upside and downside risks to the forecast.
India had lowered its economic growth forecast for the fiscal year 2015-2016 to 7-7.5 percent in the mid-year economic analysis presented in Parliament.
Earlier, the finance ministry had forecast a growth rate of 8.1-8.5 percent. The economy has shown a 7.2 percent growth in the first half of the current fiscal year.
The revision came as a result of weak global demand and expected lower agricultural output due to a drought situation in the country caused by rain shortfall.