New Delhi, Dec 8 (PTI) The Indian economy is expected towitness cyclical growth recovery, with real GDP growth likelyto accelerate from 6.4 per cent this year to 7.5 per cent in2018 and further to 7.7 per cent in 2019, says a report.
According to global financial services major MorganStanley, corporate return expectations and balance sheetfundamentals are improving, and a strengthening financialsystem should be able to meet investment credit demand.
"This sets the stage for a fully fledged recovery in2018, and we expect real GDP growth to accelerate from 6.4 percent in 2017 to 7.5 per cent in 2018 and further to 7.7 percent in 2019," Morgan Stanley said in a research note.
The global brokerage is confident about prospects for arecovery in private capital spending as demand conditions areimproving post demonetisation and GST implementation.
Besides, both consumption and exports are picking up andthis in turn should lead to an improvement in corporaterevenues.
"...plan to recapitalise the state-owned banks wouldremove the potential tail risk of the banking system posing adrag on growth, improve the headroom for growth and boostinvestors' and domestic corporate sentiment," Morgan Stanleysaid, adding "this should help to cement the growthacceleration and capex recovery that we were expecting".
On prices, the report said the cyclical growth recoveryand normalising food prices should drive a pick-up in headlineinflation.
"Against the backdrop of better macro outlook, we expectthe RBI to hike in the second half of fiscal 2019," it noted.
The Reserve Bank of India in its fifth bi-monthly reviewfor the current fiscal on December 6, kept repo rate unchangedat 6 per cent and reverse repo at 5.75 per cent. PTI DRRABM.
This is unedited, unformatted feed from the Press Trust of India wire.