12. RESPONSIBLE CONSUMPTION AND PRODUCTION

Private consumption growth, capex revival to drive Indian economy, says Morgan Stanley

Written by Amanda
Morgan Stanley

Morgan Stanley

The continued rebound in private consumption and an expected revival in private capital expenditure will drive the economic growth for India in the near-to-medium term, Morgan Stanley said.

The global analytics major has also revised India’s GDP growth forecast for FY25 to 6.8 percent from its previous estimate of 6.5 percent on the back of sustained momentum in industrial activities and capital expenditure cycle. The brokerage said that it expects growth to be broad-based and the gaps between rural-urban consumption and private-public capex to narrow in FY25.

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Growth in private consumption will be supported by moderation in inflation, better terms of trade for the rural sector, a stable trend in net household financial savings rate, and improvement in labour demand conditions, the brokerage said.

Private consumption has rebounded in the past four quarters, growing at 3.5 percent in the December 2023 quarter as against 1.8 percent in December 2022, but it is still below the pre-pandemic levels, pointed out Morgan Stanley.

The consumption growth has been uneven in the post-pandemic phase with rural households still recovering from the blues and inflation-inflicted toll on their finances.

Morgan Stanley anticipates an increase in capital expenditure, which is crucial for fostering economic growth in the medium term.

Capex growth, averaging 8.5 percent since June 2022, reached double digits at 10.6 percent in the December 2023 quarter, compared to the pre-pandemic average of 7.3 percent (2017-2019). Government-led capital spending has driven the recovery in capital expenditure since Covid.

The analytics major said that public capital expenditure is robust, with both central and state governments and public sector enterprises accelerating their spending in the current fiscal year. Private capital expenditure, which has been subdued over the past decade, is also on a round due to the government’s focus on infrastructure development, enhancing the investment climate and attracting private funds.

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Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Source: moneycontrol.com

Morgan Stanley

Morgan Stanley

The continued rebound in private consumption and an expected revival in private capital expenditure will drive the economic growth for India in the near-to-medium term, Morgan Stanley said.

The global analytics major has also revised India’s GDP growth forecast for FY25 to 6.8 percent from its previous estimate of 6.5 percent on the back of sustained momentum in industrial activities and capital expenditure cycle. The brokerage said that it expects growth to be broad-based and the gaps between rural-urban consumption and private-public capex to narrow in FY25.

Story continues below Advertisement

Growth in private consumption will be supported by moderation in inflation, better terms of trade for the rural sector, a stable trend in net household financial savings rate, and improvement in labour demand conditions, the brokerage said.

Private consumption has rebounded in the past four quarters, growing at 3.5 percent in the December 2023 quarter as against 1.8 percent in December 2022, but it is still below the pre-pandemic levels, pointed out Morgan Stanley.

The consumption growth has been uneven in the post-pandemic phase with rural households still recovering from the blues and inflation-inflicted toll on their finances.

Morgan Stanley anticipates an increase in capital expenditure, which is crucial for fostering economic growth in the medium term.

Capex growth, averaging 8.5 percent since June 2022, reached double digits at 10.6 percent in the December 2023 quarter, compared to the pre-pandemic average of 7.3 percent (2017-2019). Government-led capital spending has driven the recovery in capital expenditure since Covid.

The analytics major said that public capital expenditure is robust, with both central and state governments and public sector enterprises accelerating their spending in the current fiscal year. Private capital expenditure, which has been subdued over the past decade, is also on a round due to the government’s focus on infrastructure development, enhancing the investment climate and attracting private funds.

Story continues below Advertisement

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Source: moneycontrol.com

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Amanda

Hi there, I am Amanda and I work as an editor at impactinvesting.ai;  if you are interested in my services, please reach me at amanda.impactinvesting.ai

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