India's economic growth is forecast at around 6.5% for FY2024 and FY2025, according to Morgan Stanley Research on Monday.

Within its 2024 India Economics Outlook, the research arm of the investment bank said the country's domestic demand, bolstered by strong corporate and financial sector balance sheets, will boost India's growth during a global slowdown.

The International Monetary Fund has also hiked its 2023/24 growth forecast for India to 6.3% from 6.1% in July, thanks to stronger-than-expected consumption during the first quarter.

Whereas the Reserve Bank of India expects growth at 6.5% for FY24.

In addition, Morgan Stanley forecasts headline inflation to moderate to 4.9% in FY2025 from 5.4% in FY2024, Mint reports.

"On the external balance sheet side, we expect the current account deficit to remain in a range of 1.5-1.7% of GDP in FY2025-26, steady terms of trade, and strength in net service exports," Morgan Stanley said.

"India's inclusion in the GBI-EM index from Jun-24 will likely support the balance of payments by augmenting capital flows and thus aiding the funding profile."

Furthermore, Morgan Stanley forecast the central bank will hold interest rates steady until the first half of 2024.

"However, we maintain our expectation of a shallow rate cut cycle from June 24, driven by visibility of sustained moderation in inflation. We build in two rate cuts of 25bps each, which will keep real policy rates averaging at about 100bps in 2024," it said.

"Risks of a delayed start to the easing cycle could emerge from higher commodity prices (especially oil) pushing up inflation and/or tighter global financial conditions weighing on the currency and adversely impacting macro stability," Morgan Stanley added.

The Reserve Bank of India has kept the repo rate the same at 6.5% since February.