Financial services firm Morgan Stanley has cut its India GDP forecast to 7.2% for the year ahead, which is in line with the Reserve Bank of India’s current forecast. Global trade has slowed down and tight financial conditions have weighed on many major economies, including India. The firm also revised its forecast for inflation, which is now forecast to average 6.4% in the next 12 months.

The bank said reopening activity in India would cushion the fall in the economy, and the fall in commodity prices would support consumption growth and the informal sector. It also said that government reforms and the expansion of public infrastructure will continue to help private capex. However, there are risks to the projection. However, the RBI have lowered their inflation targets in recent weeks.

In June, annual consumer inflation had reached multi-year highs, and the bank expects more respite ahead. Meanwhile, the Reserve Financial institution of India raised its key interest rate by 50 basis factors, thereby dampening the inflation rate. The bank expects the terminal repo rate to remain at 6.5 percent by April 2023. Morgan Stanley said India’s economic growth rate will be 7.2%Y in FY2023 and 6.4%Y in FY2024.

The bank said the correction in commodity prices eased the pressure on macro stability and global risk-off sentiment. This comes after several other financial institutions and rating agencies slashed their growth forecasts for India. According to Morgan Stanley, the World Bank revised India’s FY23 GDP growth forecast to 7.5% from 8.2%. Similarly, the OECD estimates India’s FY23 real GDP growth to 6.9% in FY23 and 7.2% in FY24, but warns that high inflation and high energy prices will slow the Indian economy down.