All the conditions are in place for India’s sustained economic expansion, and is well-placed to sustain growth rates of above 6 per cent, Morgan Stanley said in a new research report

“India’s economy is going from strength to strength. This broad-based recovery in demand runs counter to the weakness we are seeing outside of Asia. We see healthy balance sheets sustaining the robust trends in domestic demand. India is a key contributor to Asia’s growth outperformance,” Morgan Stanley said in a report titled Asia Macro Charts: Trendspotting: India - Sustaining the Strong and Broad-Based Recovery.

“We have been constructive on India’s growth outlook for some time, arguing that We think India is benefitting from a combination of cyclical and structural tailwinds. In recent months, a wide variety of indicators suggest that India’s recovery is strong and broad-based, and is well-placed to sustain growth rates of above 6%,” Morgan Stanley said. 

Room to run

For instance, services PMI is at a 13-year high, and manufacturing PMI is near an 11-year high, both well above that of other economies; passenger vehicle sales are at 131 per cent of pre-Covid levels, real goods, and services tax collections are 35 per cent higher than pre-Covid and services exports have risen by 84 per cent since Oct-20. 

“While India will also see some downside to its goods exports, this is being offset by strong domestic demand and services exports. Domestic demand is supported by healthy balance sheets,” the report added. 

Meanwhile, the key macro stability indicators of inflation and current account deficit have moved back into policymakers’ comfort zones. This suggests that policymakers will not have to bring monetary policy into restrictive territory, allowing economic expansion further room to run. 

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