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Morgan Stanley cuts India's growth forecast to 6.3%

Last Updated: Monday, May 21, 2012 - 15:59

New Delhi: Morgan Stanley on Monday cut India's economic growth forecast for 2012 to 6.3 percent for a prior 6.9 percent, while also cutting its forecast for the financial year 2013 to 6.8 percent from an earlier 7.5 percent.

Morgan Stanley said the cut was due to a 'bad' growth mix, that is a combination of high national deficit and an expansionary policy of supporting consumption while private investment slows - had reached its limits.

However, on a financial year basis, the bank expects 6.3 percent for FY’13 and at 6.9 percent growth for FY’14.

The bank also expects the Reserve Bank of India (RBI) to lower repo rate by an additional 100 bps by March 2013, after a 50 bps cut effected in April.

Falling rupee and high inflation would make it difficult for India to achieve 7.5 percent economic growth during the current financial year, Planning Commission Deputy Chairman Montek Singh Ahluwalia said on Sunday.

"The Finance Ministry has said they are hoping for a 7.5 percent growth this year. That is going to be tough but not impossible," Ahluwalia said.

He said while the last quarter did not show robustness, it remains to be seen how growth in the first quarter of the current fiscal will fare.

"It is going to be a slow transition," he said, adding that in India "we need to get out of a what looks like a decelerating growth phase, and move to the growth path."

Economic worries over the past few months like rupee depreciation, high inflation and current account deficit are not helping India, which has been trying to get back on the pre-global crisis growth rates of 8-9 percent.

The rupee has depreciated by 11 percent against dollar since March. At the same time, inflation in April rose to 7.23 percent against 6.89 percent a month ago.

The global financial crisis of 2008 had pulled down India's growth rate to 6.7 percent in 2008-09. India has projected a growth rate of 7.6 percent in 2012-13, up from 6.9 percent recorded in the previous fiscal.

Bureau Report

First Published: Monday, May 21, 2012 - 15:59
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