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The full reopening of the economy last year, cyclical recovery in consumption, increased private sector capex, and acceleration on government spending will contribute for 6.2 per cent growth in India's gross domestic product (GDP) in FY24, said Morgan Stanley in a report.

The report also said the inflation in India is likely to be below 5 per cent in the second quarter of calendar year 2024.

According to Morgan Stanley, the key for sustained domestic demand is a pickup in capex, which will help create more jobs, thus leading to a virtuous cycle of more jobs-to-higher income-higher savings-higher investment.

The headline consumer price index (CPI) print for March was in line with expectations.

"We expect inflation to decelerate more decisively in the quarter ending June, to below 5 per cent, supported by favourable base effect and moderating commodity prices. Inflation for April is currently tracking at 4.7 per cent YoY. We expect inflation to average around 5.5 per cent in F2024. with risks skewed to the downside from lower commodity prices," Morgan Stanley said.

On the Reserve Bank of India's (RBI) action on repo rate, it expects the rates to be on hold in calendar year 2023 as inflation will remain below the 6 per cent mark decisively and cuts to happen in the first quarter of 2024.

"Indeed, we expect inflation to track below 5 per cent in QE June and see downside risks to our forecast of inflation averaging 5.5 per cent in F24. While in our base case we expect a shallow rate cut cycle to start from 1Q24, we see risks of the same starting earlier based on an improving inflation outlook," the report notes.