New Delhi, March 1 The confluence of a favourable fiscal policy that supports both capex and consumption and easing monetary policy across all its levers — rates, liquidity and regulations and robust services exports – that augur well for the job market outlook are likely to aid the growth momentum for India, a Morgan Stanley report has said.
The GDP print for December quarter “reaffirms our view that growth is in recovery mode, after having bottomed out in QE Sep-24”, according to the report.
The high frequency data for January/February suggests a mixed trend with gradual signs of recovery.
While implied March quarter growth is at 7.6 per cent (as per advance estimate), “we believe growth will likely track lower than that at 6.7 per cent”.
“As such, we expect FY25 growth to be 6.3 per cent,” the report estimated.
The report watches trends in government spending across revenue and capital expenditure, domestic liquidity and financial conditions and external environment in the context of trade and tariff developments and US Fed's policy.
For Q3 FY25, the internals suggest that the uptick in GDP was led primarily by strength in both private consumption (supported by a buoyant rural economy) and government consumption (pickup in government spending).
As such, while private consumption grew 6.9 per cent YoY, government consumption rose to a five quarter high of 8.3 per cent YoY.
Gross capital formation, on the other hand, remained largely steady at previous-quarter levels at 5.7 per cent YoY (vs. 5.8 per cent in 3Q24).
“Net exports contributed positively to GDP as growth in exports outpaced growth in imports. For 2025, the second advance estimates pegs growth a tad higher at 6.5 per cent YoY vs. 6.4 per cent as per first advance estimates and MSe at 6.3 per cent,” according to the report.
Within industry, manufacturing activity and electricity, gas and consumption grew in the December quarter, while construction activity moderated from last quarter.
Across services, the growth was led by an improving momentum in trade, hotel, transport and communication services, supported by the holiday season; while others remained steady at previous quarter levels.
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