New Delhi: Global financial firms Nomura and Morgan Stanley on Thursday said that the recovery in the Indian economy is on track. “Looking at the trend in macro growth indicators (consumption, investment and external demand), the growth recovery is becoming more broad-based as of quarter ending March.
Growth indicators continue to show a robust trend and continued momentum in public capex and foreign investment flows,” said Morgan Stanley. Moreover, it said that the recovery is being broadened by a pickup in discretionary consumption.
“Indeed, we now see a broadening out of the consumption recovery with both urban and rural demand improving. We believe that the sustained deceleration in inflation, monetary policy easing,and a pickup in job creation will help support the consumption recovery,” it said.
Morgan Stanley said that in this environment of weak external demand, the key driver to a growth recovery will be a pickup in domestic demand. “In this context, the recent trend in growth indicators pointing to broadening of the recovery from public capex and FDI to discretionary consumption suggest a sustained, gradual improvement,” it said.
Morgan Stanley noted that the key factor which will act as a constraint on the overall growth recovery will be the weak trend in private capex, which is being held back by a combination of factors inclu-ding a slowdown in external demand leading to low capacity utilisation.
Nomura, meanwhile, said that the recovery is on track in key sectors and factors like favoura-ble monsoons and additional spending by way of pay commission awards may add to this recovery.
According to the Japanese financial services major, the magnitude and breadth of recovery across sectors is “surprisingly strong”. “In our view, the recovery is very much on track and evidence is now getting stronger that a synchronous recovery is now on the way,” Nomura said in a research note. As per the report, the annual YoY growth rates for eight key production and real activity indicators have sharply recovered this year.
