India's GDP expected to grow 7.7% in 2020: Morgan Stanley

Recovery in private capital expenditure will be underway in 2018 with real GDP growth expected to accelerate to 7.5% in 2019 and further to 7.7% in 2020. Morgan Stanley in a report said that "We are confident that a recovery in private capex will be under way in 2018, for the first time in six years".

The aggregate demand is improving with a synchronous recovery in consumption and exports, which will lift capacity utilisation, the report stated. It further added that the corporate balance sheet fundamentals are improving and the recapitalisation of the state-owned banks would improve the overall banking system's ability to meet investment credit demand.

However, the Morgan Stanley report also pointed out that with policy reforms and cyclical recovery gaining momentum, it sees an upside risks arising for the domestic demand outlook. 

The report added that the headline inflation trajectory should firm up from here along with the cyclical recovery in growth and normalizing food prices as the pay commission related hikes by states and across sectors is expected to push up the inflationary pressures. 

“We expect headline CPI inflation to rise to 4.6% in 2019 from 3.4% in 2018,” Morgan Stanley said.