Because of higher oil prices, the economic recovery of torpedo around the world, Morgan Stanley has cut the estimated Indian GDP for the fiscal year from April 1 by 50 basis points to 7.9 percent, increasing the projection of retail inflation to 6 percent and expect a transaction deficit to run into 3 per pen penny.

“Even when we expect a cycle recovery trend to continue, we hope it is softer than we projected before,” he said in a report. “We believe that the ongoing geopolitical tension exacerbates external risk and provides a stagflation to the economy.”

India is influenced through three main channels – higher prices for oil and other commodities; Trade, and more stringent financial conditions, affecting business / investment sentiment. “Building higher oil prices, we cut our F23 GDP growth estimate, up to 7.9 percent, we lift our CPI inflation estimates to 6 percent, and expect a transaction deficit to expand 10 years from 3 percent of GDP.,” That said .

India is 85 percent depending on imports to meet the needs of its oil and Spurt recently in international oil prices, which drive the rate to 14 years high of $ 140 per barrel before being withdrawn, will produce more for commodities.

Also, higher prices will produce inflationary pressures. The main channel of the impact on the economy will be a higher inflation of cost encouragement, feeding into wider price pressure, which will burden all economic agents – households, businesses and the government.

Regarding Indian exposure to the risk of macro stability, Morgan Stanley said that even as a macro stability indicator is expected to deteriorate, lack of domestic imbalances and focus on increasing productivity dynamics will help reduce risk.

“Therefore, we do not expect that fiscal or monetary policies need to be tightened by disrupting the risk of macro stability. The risk will come from the increase in sustainable oil prices, which lead to rapid setbacks in macro stability and currency volatility,” it was said.

Brokers expect an increase in repo interest rates at the RBI monetary policy committee meeting. “But we now expect april policy to mark the process of normalization of policies with a reverse repo interest rate increase.”

“However, if the RBI delays the process of normalization, the risk of increasing interest rates will increase. We see less space for fiscal policy stimulus to support the growth given by high deficits and debt levels – we see the possibility of simple fuel tax. Cut and dependence on The National Rural Employment Program as an automatic stabilizer, “he said.

The report sees a reverse risk of 0.5 percent from GDP to a 6.4 percent fiscal deficit target of GDP for FY23 (April 2022 to March 2023).

“Again, the key risk will be a sharp and sustainable increase in oil prices, worsen the concern of macro stability and leads to disturbing monetary fasting. Furthermore, risks can arise if global growth conditions weaken further, which will damage the export cycle and Indian Limb Of course. ” “We see the risk of leaning to the downside for growth and upwards for inflation and CAD,” he said.