Morgan Stanley anticipates consumption recovery in FY24 second half

Morgan Stanley has observed early signs of recovery in consumption growth which had been lagging in the first half of the current financial year, primarily due to low rural demand.

Chetan Ahya, Chief Asia Economist at the investment bank said there are indications of a pickup in volumes in the third quarter (October-December) including for consumer durables. He anticipates consumption growth for the full year to improve to 6.0% from the 4.4% seen during the first half of the year.

Gross fixed capital formation has been strong this year with full year growth estimated at 11% led by government capex. However, consumption growth has been subdued with growth estimated at only 4.4% in line with that seen in the first half. This has led to concerns that companies might defer capacity expansion plans.

Ahya said the current assessment is based on anecdotal evidence and there will be better clarity once consumer companies declare their December quarter results,

Morgan Stanley has also revised upward its gross domestic product (GDP) forecast for the current financial year to 6.9%, and projects growth for the next financial year (FY25) at 6.5%.

“We had initially expected India's GDP growth to be at 6.5% for the 12 months ending March ’24. However, with the recent GDP data from the last quarter, we have already upgraded it to 6.9% and are maintaining that estimate for the period. Looking ahead to the next year, our projection remains at 6.5%."

The National Statistics Organisation (NSO) recently unveiled its initial forecast for India's economic growth in 2024 (FY24), indicating an anticipated growth rate of 7.3%. This figure surpasses the Reserve Bank of India's (RBI) latest projection of 7%, and CNBC-TV18's earlier estimate of 6.8%.

Ahya provided further details on Morgan Stanley's revised numbers, stating, Also Read

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Discussing recent economic trends, Ahya noted substantial foreign portfolio inflows into India in the last six weeks, with continued positive momentum alongside Japan. He dismissed concerns about potential competition for investment, stating, “I don't think there is a sort of cannibalising of flows because of Japan doing well.”

For the entire interview, watch the accompanying video