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Morgan Stanley Economist Predicts India’s Growth Rate to Fall Short of China


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Morgan Stanley’s Chief Asia Economist, Chetan Ahya, suggests that India may not be able to achieve the same high growth rates as China. In an interview with Bloomberg, Ahya predicts that India’s gross domestic product (GDP) will grow steadily at a rate of 6.5-7% in the long term. He also acknowledges that India, despite its efforts to attract investment, still lags behind China as a global manufacturing powerhouse.

Ahya points out that India faces obstacles to its economic progress, such as inadequate infrastructure and a workforce with insufficient skills. These challenges are likely to limit India’s growth to a solid but lower rate of 6.5-7%, compared to China’s historical growth rates of 8-10%. However, despite these hurdles, Morgan Stanley remains optimistic about India’s future and sees similarities between its current growth phase and the investment-driven boom of the mid-2000s.

Ahya notes early signs of economic progress in India, including increased capital inflows and a growing share of global foreign direct investment. However, he believes that India is unlikely to rival or strongly compete with China in the manufacturing sector. China’s established position in manufacturing, as well as its expansion into emerging sectors like renewable energy, space exploration, and semiconductors, give it a superior advantage.

According to Ahya, robust growth in India could influence the Reserve Bank of India (RBI) in its decision to cut interest rates this year. While Morgan Stanley predicts a “shallow rate cut cycle” starting in June, unexpected growth could potentially delay or even cancel these cuts. RBI Governor Shaktikanta Das has stated that he will not consider reducing rates unless inflation consistently stays around the target of 4%. However, current data shows that inflation is currently exceeding this target by more than 1%.

One Comment

  1. Mr self proclaimed economist you forget to account in simple fact that China achieved exports based economic growth during robust Global economic growth. However when India reached the inflexion point to launch we witness down cycles in world economy led firstly by Pandemic & later Ukraine war. However India is on cusp of achieving technology superiority be it IT Or engineering, India will race ahead of others to join USA in the Club. China lags far behind & depend upon imports & reverse engineering to copy. Hence we find Chinese failure in manufacturing of hitech products from chips, indigenous jet engine to advanced allows etc.

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