New Delhi: The Indian economy is expected to grow by 6.7% in 2024-25 due to weaker performance in the second quarter, according to a report released by Morgan Stanley on Monday. The global investment bank has revised its projection from 7% earlier.
High frequency indicators for July-September have shown weak growth, such as goods and services tax (GST) collections falling to a 40-month low in September, core sector output declining in August, manufacturing Purchasing Managers’ Index (PMI) declining to an eight-month low and moderating passenger vehicle and two-wheeler sales, said the report titled ‘2025 India Economic Outlook-Domestic Demand to Carry Growth Baton’.
The firm estimates a growth of 6.3% in the second quarter, with a potential rebound of 6.7-6.8% in the second half of the financial year. This recovery is expected to be driven by a pickup in agricultural growth and government spending.
Growth is anticipated to remain steady at 6.5% in 2025-26 and 2026-27, supported by domestic demand, the report highlighted. Consumption, which accounts for 60.3% of the gross domestic product (GDP), remains a central driver of the constructive outlook for the economy, the report noted.
Factors such as favourable southwest monsoon, rising real wages and improving labour market conditions will support rural demand. Urban demand will benefit from stronger job growth and improved financial conditions, although risks to consumption due to higher inflation persist. Improvement in rainfall in 2024 will support crop outlook and help ease food inflation, however, volatility risks persist.
While food prices are likely to moderate in the next 12 months, global commodity price volatility, driven by trade/tariff policies, could introduce uncertainty. As a result, average inflation will be around 4.3% in 2026-27, lower than 4.9% in 2024-25, the report said.
