Indian economy to start showing strong growth from April next year: Morgan Stanley

Mumbai: Even as first signs of recovery were visible in October and many predict that the country would keep the momentum up, Indian economy would see strong growth only by April next year, a Morgan Stanley report said.

“We maintain a constructive view on the economy and expect the growth recovery to gain strength from 2Q21,” the Insight: 2021 Global Macro Outlook report said. The report said that the growth would be accompanied with inflation under control.

“Inflation will remain marginally above the 4%Y target but external stability risks stay contained and policy rates only see a first lift-off at year-end from an extraordinarily accommodative stance,” the report said.

The report also said that China’s GDP would grow at 9% in 2021 before it comes down to 5.4% in 5.4% while the US economy would grow at 5.4% in 2021.

Domestic demand-oriented economies like India and Brazil, a number of indicators have recently exceeded pre-COVID-19 levels and are registering positive year-on-year growth. This strong momentum should continue into 2021, with EM growth rising to 7.4%, higher than the consensus expectation of 6.3% the report added.

Global economy too would see a recovery across geographies and sectors from March-April next year. “Driving this synchronous recovery will be a more expansive reopening of economies worldwide and the extraordinary monetary and fiscal support now in place. Global GDP, already at pre-COVID-19 levels (based on seasonally adjusted GDP levels), continues to accelerate and is on track to resume its pre-COVID-19 trajectory by 2Q21 (April),” the report said.

The report also cautioned of some risks along the path to recovery. The near-term risks hinge on virus and vaccine developments. A sharper rise in hospitalisations in the US or Europe could prompt policy-makers to adopt stricter lockdown measures than our base case, and approval of vaccines for emergency use could come later than January 2021. Looking a bit further out, we see scope for upside inflation risks from 2H21, which could create a disruptive shift in expectations on Fed policy, the report said.

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