Morgan Stanley cuts India growth forecasts on inflation, global slowdown
Reuters
Published May 11, 2022 07:29AM ET
Updated May 11, 2022 09:55PM ET
(Reuters) - Morgan Stanley (NYSE:MS) has lowered its forecasts for India's economic growth in the next two fiscal years, saying a global slowdown, surging oil prices and weak domestic demand would take a toll on Asia's third-largest economy.
Gross domestic product growth will be 7.6% for fiscal 2023 and 6.7% for fiscal 2024, 30 basis points lower than the previous estimates, the brokerage said in a note dated Tuesday.
The cut reflects a pronounced economic impact from the Russia-Ukraine conflict that has driven up crude prices, pushing retail inflation in India - the world's third-biggest oil importer - to its highest in 17 months.
"The key channels of impact will likely be higher inflation, weaker consumer demand, tighter financial conditions, the adverse impact on business sentiment, and a delay in capex recovery," said Upasana Chachra, Morgan Stanley's chief economist for India.
Both inflation and the country's current account deficit will likely get worse due to broad-based price pressures and record-high commodity prices, she added.
In a move to contain unruly inflation, India's central bank raised its main lending rate off record lows at an off-cycle meeting earlier in May. Markets see the Reserve Bank of India hiking its key rates further in the coming months as inflation remains elevated.
The country has also been importing oil from sanctions-hit Russia at discounted rates to ease some of the pressure from surging crude prices, which recently touched $139 a barrel.
India meets nearly 80% of its oil needs through imports and rising crude prices push up the country's trade and current account deficit while also hurting the rupee and fuelling imported inflation.
Get The News You Want
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.