Morgan Stanley expects India's FY24 GDP growth to slow down to 6.4%

American brokerage Morgan Stanley on Monday cut its FY23 real GDP expansion estimate for India by 0.40 per cent to 7.2 per cent on slower global growth.

It said the GDP growth will slow down to 6.4 per cent in FY24, the brokerage said, adding that this is lower by 0.30 per cent compared to the earlier estimate.

A majority of watchers are expecting FY23 GDP growth to come at over 7 per cent levels. The RBI estimate also stands at 7.2 per cent.

"We pare our GDP forecasts by 0.40 per cent to 7.2 per cent for FY23 and by 0.30 per cent to 6.4 per cent for FY24 on the back of slower global growth.

"We see downside risks emanating from a weaker than expected global growth trend, supply-side-driven commodity price shock and faster than warranted tightening of financial conditions," the brokerage said in a note.

The brokerage said it expects global growth to slow down to 1.5 per cent for the quarter ended December 2022 from 4.7 per cent registered in the year-ago period, which will have an impact on the export growth for India.

However, domestic demand will be providing a partial offset to the impact of the slowing export growth, it said, noting that the government's supply-side response and the reopening vibrancy to partially counter the downside.

The ongoing moderation in commodity prices is improving the near-term trajectory for macro stability and also cut its FY23 average inflation target to 6.5 per cent against 7 per cent earlier.

"However, we do not expect much change in inflation beyond FY23 and expect it to average 5.3 per cent in FY24. Near-term risks to the inflation trajectory stem from changes in commodity prices and/or domestic food prices," it said.

The Reserve Bank will continue with the policy normalisation measures, and the repo rate will be at 6.5 per cent by April 2023 against 4.9 per cent at present, it said.