“We raise GDP growth to 6.8 per cent YoY in F2025, a rise of 30bps from our earlier estimate of 6.5 per cent, on continued traction in industrial and capex activity. On CY basis, we expect growth at 6.8 per cent YoY for 2024, from 6.4 per cent earlier”, it said.

“We expect GDP growth to track at around 7 per cent in QE March-2024 with GVA growth of 6.3 per cent and thus F2024 GDP growth of 7.9 per cent,” Morgan Stanley said.

The brokerage expects growth to be broad-based and the gaps between rural-urban consumption and private-public capex to narrow in F2025.

The cycle will have more years of steady expansion driven by improvement in productivity growth, which will ensure macro stability remains benign, it said.

Moderating inflation trajectory and benign current account deficit opens up room for a shallow easing cycle as we have been highlighting. However, the brokerage expects the easing cycle to be delayed to 3Q24 from our earlier view of 2Q24.

“Further, we highlight risks of a potential delay and/or risk of no easing driven by better-than-expected trend in growth, capex and productivity, which will imply higher neutral real rates,” Morgan Stanley said.

Domestic demand growth has been steadfast and is a key driver of the constructive outlook for the economy. Consumption accounts for 60.3 per cent of GDP and is the mainstay of the domestic demand story. While private consumption has recovered over the last four quarters, with growth tracking at 3.5 per cent in QE December-2023 vs. 1.8 per cent in December-2022, the trend in private consumption is just catching up to the pre-pandemic trend, Morgan Stanley said.