Retail inflation in India may fall below 5 percent level while the GDP is likely to contract by at 5.7 percent in FY21, said Chetan Ahya, Chief Economist and Global Head of Economics at Morgan Stanley.
Speaking to CNBC-TV18 in a special series ‘Outlook 2021’, Ahya said that there was a lot of uncertainty on India’s inflation outlook.
“At this point of time our base case is that the supply-side concerns, that have caused the inflation to go up, will recede and you should see a decline in inflation in India around 4.5-5 percent,” he said.
“There are risks which we think are high while our base case is that inflation will come down, we are watchful of that risk especially because the monetary policy is extremely accommodative. If you look at the interbank call rates, they are way below the repo rate. So in the context of negative real interest rates, it’s going to be challenging to bring down inflation in India,” Ahya added.
Ahya expects gross domestic product (GDP) to contract by at 5.7 percent in FY21 and 10 percent growth for FY22 for India.
On the global front, he expects V-shaped recovery in terms of growth. “We expect it also in India. In fact, the data in India is already evident as the GDP already back to pre-COVID level in various data points that we look at,” he said.
According to him, growth will remain strong for next few years.
Watch the video for full interview.