New Delhi: Morgan Stanley on Wednesday lowered India's GDP growth forecast for 2013-14 to 6 percent, from 6.2 percent estimated earlier, citing challenging domestic and external environment and lower-than-expected expansion logged in the last quarter.
The Indian economy is healing but at a gradual pace, and although the global financial services player has lowered the country's growth estimate a bit, it still expects a gradual recovery.
"We have reduced our GDP growth forecast for FY2014 to 6 percent from 6.2 percent earlier to reflect lower-than- expected GDP growth for the quarter ended December 2012 and the still-challenging domestic and external environments," Morgan Stanley Economist Chetan Ahya said in a research note.
The Indian economy grew by 4.5 percent in the October-December period of the current financial year, pulled down by poor performance of farm, manufacturing and mining sectors.
GDP growth bottomed out in the quarter ended December 2012 and going forward the country is likely to see an improvement in agriculture growth, a slight pick up in export growth that also supports manufacturing and trade services.
Some of the other factors that would help in healing the economy include moderation in inflation and further gradual monetary easing and continued policy measures from the government, which should help stabilise private capex as a percentage of GDP, Morgan Stanley said.
"Taking into account these factors, we are currently building in a gradual recovery in GDP growth in FY2014 to 6 percent (while lower than our earlier estimate of 6.2 percent) as compared to our estimate of 5.1 percent for FY2013.

"We believe that the initial phase of recovery will be driven by an improvement in productivity growth rather than a big rise in investment to GDP. We expect the government to continue to take policy measures that will slowly improve productivity and the growth mix," the report said.
Indian economy is estimated to have grown 5 percent in 2012-13. The Finance Ministry's Economic Survey of 2012-13 has predicted a growth rate of 6.1-6.7 percent for the next fiscal.


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