India maintains economic momentum amid elections: Morgan Stanley

India continues to uphold its position as fastest-growing economy, bolstered by robust domestic fundamentals and macro stability, according to a recent report by Morgan Stanley. report highlights resilience of Indian economy, citing factors such as strong domestic consumption, stable credit growth, and a favorable demographic dividend.

In March, India witnessed significant milestones in its economic indicators. Manufacturing Purchasing Managers' Index (PMI) surged to a 16-year high, signalling a robust expansion in manufacturing sector. Concurrently, core Consumer Price Index (CPI) reached an all-time low, reflecting well-contained inflationary pressures. se positive developments have led Morgan Stanley to revise its projections, no longer expecting Reserve Bank of India (RBI) to enact furr rate cuts during this cycle.

Morgan Stanley anticipates bro-based growth in coming fiscal year, with expectations of narrowing gaps between rural-urban consumption patterns and private-public capital expenditure. forecast suggests a growth rate of 6.8 per cent for calendar year 2024, followed by a slightly moderated growth of 6.5 per cent in 2025. Private capital expenditure is exhibiting signs of recovery, as indicated by Morgan Stanley Capex Indicator reaching an all-time high in fourth quarter of 2023.

report also discusses ongoing Indian elections, held in multiple phases from April to June, with vote counting scheduled for June 4. Despite electoral process, economic indicators remain strong, with heline CPI moderating to 4.9 per cent in March and core CPI hitting a record low of 3.3 per cent. Morgan Stanley predicts range-bound inflation of 4-5 per cent for years 2024 and 2025, with food inflation potentially introducing volatility to heline CPI.

RBI, in its recent policy meeting in April, opted to maintain status quo on policy rates for seventh consecutive time, keeping repo rate unchanged at 6.5 per cent. central bank emphasised its commitment to aligning with 4 per cent inflation target over medium term and preserving financial stability through nimble monetary operations.

Looking ahe, RBI aims to navigate potential risks, including fluctuations in food prices and changes in global financial conditions. Despite se challenges, Morgan Stanley remains optimistic about India's economic outlook, underpinned by prudent policies and favorable macroeconomic conditions.