According to Morgan Stanley analysts, India is likely to be the fastest-growing Asian economy in the Asian region in 2022-23, with India’s GDP growth averaging 7% during this period – the highest among the largest economies – and contributing 28% and 22% to Asian and global growth, respectively. They predicted that the Indian economy would have its best run in over a decade as pent-up demand is released.
According to Chetan Ahya, Chief Asia Economist at Morgan Stanley, the key change in India’s structural story is the clear shift in policy focus toward increasing the economy’s productive capacity.
Policymakers, he wrote, have undertaken a series of reforms that will catalyse an increase in the private capex cycle, thereby assisting in the release of a powerful productivity dynamic and the initiation of a virtuous cycle. A significant portion of this optimism stems from a drop in commodity prices, particularly crude oil.
With oil/commodity prices down 23-37% since the March 2022 peak, Morgan Stanley expects macro stability indicators to return to the comfort zone and the Reserve Bank of India (RBI) to avoid aggressive rate hikes in the future.
Aside from falling commodity prices, the economy’s reopening earlier this year has also aided recovery. According to Morgan Stanley, demand has been increasing as mobility has increased and remained above pre-Covid levels in recent months.
