Strong domestic demand supporting India's growth: Morgan Stanley

New Delhi, Apr 23: Morgan Stanley is firm on India's growth outlook, given the support it is getting from domestic demand. Citing high-frequency data, the global investment banking firm said it remains constructive on the growth outlook.

Against that backdrop, it expects India's GDP growth to be at 6.8 per cent in the current financial year 2024-25 and 6.5 per cent in 2025-26.

On the macro side, it anticipates headline inflation to remain supported by favourable base effects. It projected inflation to remain in a range of around 5 per cent in the second quarter, before moderating to 4.1 per cent year-on-year in the second half of 2024.

For the next financial year, it expects retail inflation to average 4.5 per cent.

Similarly, the current account deficit is likely to remain benign, supported by strength in service exports, and remain within the policymakers comfort zone at 1-1.5 per cent of GDP in 2025-26.

On monetary policy, it expects policy rates to remain steady at 6.5 per cent in the horizon.

"This is on the back of a shallower and deferred rate cut cycle for the Fed on the global front and improving productivity growth, a rising investment rate and inflation tracking above the target of 4 per cent on the domestic front," it explained.