India could be Asia’s strongest economy in 2022-23, says Morgan Stanley

India could emerge as Asia’s strongest economy in 2022-2023, Morgan Stanley economists said. This is because, they say, it is best-positioned to generate robust domestic demand, helped by economic policy reforms, a young workforce and business investments.

Morgan Stanley expects India’s growth to average 7 per cent for 2022-2023 and contribute 28 per cent and 22 per cent to Asian and global growth, respectively.

Morgan Stanley’s projection comes as India grew 9.2 per cent in the fiscal year 2022, a sharp recovery from a 6.6 per cent contraction in the previous year as COVID-19 lockdowns took a severe toll on its economy. The country now expects GDP growth for 2022-2023 at 8-8.5 per cent.

Also read: FM’s reply on price rise: ‘Criticism political, economy shows positive signs’

“Lower corporate taxes, the production-linked incentive (PLI) scheme and India as a potential beneficiary of supply chain diversification will catalyse and sustain domestic demand, especially in investment,” the economists were quoted by a Reuters report.

Risks from Ukraine war receding

In 2019, India had cut corporate tax rates to woo manufacturers and revive private investment, and launched the PLI scheme in 2020 to aid domestic manufacturing. Morgan Stanley sees risks related to higher energy prices, spurred by the Ukraine war and supply constraints, to remain, but added that they have begun to recede.

Morgan Stanley’s outlook also comes as developed economies paint a glum picture, with business activity in the US and eurozone contracting in July, as per their PMI data.

While India, like other economies, raised interest rates to battle inflation, Morgan Stanley said the country’s Rs 39.45-trillion budget for the current fiscal year has continued to tilt towards lifting public investment. It expects domestic consumption to pick up and services exports to hold up better than goods exports.

(With Agency inputs)

Also read: US economy shrinks for 2nd straight quarter, raises fears of a recession