RBI likely to hike rates next year, full-fledged recovery on right path: Morgan Stanley

Reserve Bank of India (File image)

Maintaining a constructive view on Indian economy, Morgan Stanley expects a full-fledged growth recovery with all drivers firing, LiveMint reported on November 16.

According to Morgan Stanley economists Upasana Chachra and Bani Gambhir, the consumption recovery is most likely to pick up pace from the first quarter of FY22 and private capital expenditure recovery to follow in H22.

Among other things, the economists expect inflation to be sticky around the 5 percent mark in 2022, which is likely to remain within the RBI’s target band of 2-6 percent.

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Chachra and Gambhir expect the RBI may begin with reverse repo hikes from December 2021 in their monetary policy meeting, with a likely hike in the repo rate from February 2022.

"We expect a full-fledged growth recovery with all drivers firing and macro stability indicators remaining in the comfort range. We believe that a pickup in investments underpinned by structural reforms will help to create a virtuous cycle of sustained high productive growth," LiveMint quoted the economists as saying.

"We expect consumption to strengthen further because we expect that the entire eligible population will be fully vaccinated in early 1Q22, which would pave the way for a broader consumption recovery in both goods and services," they added.

Morgan Stanley expects the Indian economy to grow at 7.8 percent in base case scenario and 8.6 percent in bull case for FY 2023. While for FY 2024, the growth may be 7.2 percent in base case and 7.9 percent in bull case, the research agency noted.