The Indian economy is expected to experience a gradual and sustainable recovery and post GDP growth of 7.5 percent this fiscal, American financial services firm Morgan Stanley said in a report on Tuesday.
“We expect a slightly slower pick-up in
growth trajectory, given the trailing weakness from external demand and
concerns about agriculture growth, with related impact on rural
consumption,” Morgan Stanley said in a research note.
“We expect GDP growth (new series, on
market prices) to accelerate gradually to 7.5 percent in financial year
2016 and 8.1 percent in fiscal year 2017,” it said.
India is decidedly moving out of the
macro-economic adjustment phase and into the recovery phase aided by
government policy actions and the Reserve Bank of India’s (RBI) monetary
policy response, the brokerage firm said.
However, it would 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”, it added.
The report said the upside and downside
risks to the forecast will be influenced by two key factors – 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.
“We currently see risks to our growth outlook as evenly balanced,” it said.
Meanwhile, the government’s mid-year
review released last week sharply lowered the economic growth forecast
for the current fiscal to the 7-7.5 percent range, from the previously
projected 8.1-8.5 percent, mainly because of lower agricultural output
due to deficit rainfall.
It also said there may be a need to reconsider next year’s fiscal deficit target of 3.5 percent.
