WWRR Vol.2.015

Risks: Skewed to the Downside, Mainly Due to External Factors
In the bear case, we build in a weaker growth trend due to global/domestic factors and
weaker macro stability. The global factors to watch will be higher oil prices, weaker
global growth (impact of trade tensions) and stronger US dollar/weaker global capital
market environment. On the domestic side, policy uncertainty post elections in May
2019, along with tighter-than-expected liquidity condition will have an adverse impact on
growth. We estimate growth to decelerate to 6.8% in our bear case with faster pace of
rate hikes from RBI in response to wider macro stability.
In the bull case, the private capex turnaround is stronger due to a more robust pickup in
external and domestic demand. Stronger fiscal spending ahead of the elections, coupled
with a win for the incumbent government, would also give a fillip to capex spending.
Further, global environment is benign, with positive spill overs for global capital market
flows to India. Macro stability indicators remain benign, which allows RBI to reduce the
pace of rate hike, and fiscal policy remains supportive of growth.
Exhibit 21: GDP: Base, Bull, Bear Scenarios
9%
Bull Base Bear
8.2%
8%
7.4%
8%
7.8%
8.2%
8.3%
7.6% 7.6% 7.5%
7%
7%
6.4%
7.1% 6.7%
7.3% 6.8%
6.5%
6%
6%
5%
5.5%
F2013 F2014 F2015 F2016 F2017 F2018 F2019E F2020E F2021E
Source: CEIC, Morgan Stanley Research, E- Morgan Stanley Research Estimates
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