New Delhi: Morgan Stanley has cut India’s economic growth forecasts in the next two fiscal years, according to a report by Reuters.
Global slowdown, surging crude oil prices, and weak domestic demand would take a toll on Asia's third-largest economy, said Morgan Stanley, according to the report.
The brokerage in a note mentioned that gross domestic product (GDP) growth will be 7.6 per cent for fiscal 2023 and 6.7 per cent for fiscal 2024, 30 basis points lower than the previous estimates.
The cut in GDP forecasts reflects a pronounced economic impact from the Russia-Ukraine war that has triggered up crude oil rates, pushing retail inflation in India to its highest in 17 months.
India is the world's third-biggest oil importer. So, rising energy prices is hampering country’s growth. The country meets nearly 80 per cent of its oil demand via imports. Rising crude prices push up India’s trade and current account deficit, while also hurting the rupee and fuelling imported inflation.
Upasana Chachra, Morgan Stanley's chief economist for India, said, “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.”
India’s current rate of inflation and current account deficit may get worse due to broad-based price pressures and record-high commodity prices, mainly crude oil, she said.
The Reserve Bank of India (RBI) raised main leading rates at an off-cycle meeting in May first week to contain high inflation rates.
According to market experts, the RBI will hike its key rates again in the coming months as inflation remains elevated.
India 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.