Morgan Stanley cut its forecast for India’s economic growth over the next two years, saying a global slowdown, soaring oil prices and weak domestic demand would weigh on India’s third-largest economy. ‘Asia.
Gross domestic product growth will be 7.6% in fiscal 2023 and 6.7% in fiscal 2024, 30 basis points lower than previous estimates, the brokerage said in a note. dated Tuesday.
The drop reflects a pronounced economic impact from the Russian-Ukrainian conflict which has pushed up crude prices, pushing retail inflation in India – the world’s third-largest oil importer – to its highest level in 17 months.
“The main channels of impact are likely to be higher inflation, weaker consumer demand, tighter financial conditions, the negative impact on the business climate and a delay in the recovery of investment,” Upasana Chachra said. , Morgan Stanley’s chief economist for India.
Inflation and the country’s current account deficit are likely to worsen due to widespread price pressures and record commodity prices, she added.
In a bid to contain runaway inflation, India’s central bank raised its key interest rate to record lows at an off-cycle meeting earlier in May. Markets see the Reserve Bank of India raise its key rates further in the coming months as inflation remains high.
The country has also imported oil from sanctions-hit Russia at reduced rates to ease some of the pressure from soaring crude prices, which recently hit $139 a barrel.
India meets nearly 80% of its oil needs through imports, and rising crude prices are driving up the country’s trade and current account deficit while hurting the rupee and fueling imported inflation.
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