Financial services provider Morgan Stanley forecasted that India’s GDP growth will bounce back this year after the impact of GST fades away. The company recognized that India’s underlying economic growth momentum still remains strong despite the recent slowdown. In its report, Morgan Stanley also forecasted a 6.7% growth in GDP for the financial year 2017-18.
According to the report by Morgan Stanley, this recent decline in economic growth is not an indicator of general slowdown in aggregate demand. GST-related disruptions have caused a deceleration in the country’s manufacturing activities, and it is bound to recover soon.
The report mentioned that India’s economic growth will reaccelerate since the changes made to the country’s economy are already in the rear-view mirror. It also pointed out that India has entered the next phase of productive growth, and its macroeconomic stability will remain in check.
For the first quarter (April–June) of 2017, India’s GDP slowed down to 5.7% from 7.9% for the same period last year. This number represents a three-year low in economic growth rate. This decline has been attributed mainly to the uncertainties in GST rollout.
The first quarter growth rate slowdown has made Morgan Stanley revise its forecasts for the upcoming years. The company had originally projected GDP growth of 7.6% for the calendar year 2017 and 8.0% for the calendar year 2018. Now these forecasts have been cut down to 6.4% and 7.4% respectively. Despite the cut down in forecasts, these numbers indicate that India’s economy is on its road to recovery.