Growth Outlook 2023: The Indian economy is likely to continue its growth momentum in 2023 on the back of continued strength in domestic demand, a global brokerage firm Morgan Stanley said in its report while analyzing next year’s growth prospects in Asian countries.

In 2023, we expect domestic demand to continue to be the driver of growth as domestic demand-focused economies like India have been insulated from weaker external demand conditions, the global brokerage house said in its forecast report.

It added that the country’s growth rates have held up better and have been the mainstay of the region’s growth story in recent quarters.

According to government data released on November 30, 2022, India’s economic growth slowed to 6.3 percent in the September quarter of 2022-23, down from 13.5 percent in the previous three months amid a slowdown in manufacturing and mining output.

Notwithstanding slower GDP growth, India remains the fastest growing major economy ahead of China, which recorded economic growth of 3.9 percent from July to September 2022. The Indian economy grew 8.4 percent in the July-September quarter of the last fiscal year.

Commenting on India’s economic growth in 2023, Upasana Chachra – Chief Economist India – at Morgan Stanley said: “We expect domestic demand indicators to show a broad-based recovery and will be the main driver of India’s growth trajectory in the face of global headwinds.”

She said: “We expect domestic demand strength to continue as the economy benefits from: 1) the full impact of reopening momentum, 2) seepage of the government’s supply-side oriented policies to revive capital spending and 3) stronger private sector balance sheet to improve corporate sector risk appetite.”

Similarly, the Chief India Economist expects the Reserve Bank of India (RBI) to hike interest rates to 6.5 percent in February 2023 before pausing to balance macro stability and growth.

As inflation dynamics improve, the analyst expects a flat rate cut cycle of 50 basis points (bps) leading to rate cuts of 25 bps in fourth quarter of fiscal 2022-23 (Q4FY23) and first year of fiscal 2023-24 (Q1FY24) .

The next phase of domestic demand recovery in India and Indonesia will see an increase in private investment, supported by healthy private balance sheets and a prudent policy mix, the broker said.

With PTI inputs