In a report, Morgan Stanley said the growth indicators for India had slowed post the festive season in October in a fairly broad-based manner raising investors’ concern.

“However, growth indicators have started to show signs of re-acceleration in early 2023,” it notes.

According to Morgan Stanley, healthy household balance sheets and a pickup in private and public capex will sustain gains in employment — which will allow consumption growth to stay strong in the coming quarters.

“Government policies are still very much geared towards reviving private investment, which we expect will continue to unfold as strong trailing demand has already lifted capacity utilisation,” the report notes.

The Indian budget for FY24 was another step in the right direction to crowd in private investment.

As regards China’s growth, Morgan Stanley expects its economy to grow by 5.7 per cent this year, with much of the growth recovery underpinned by a revival in consumer spending.

Consumption is expected to grow by 8.3 per cent in 2023 after two per cent growth in 2022.

“However, investors are still somewhat sceptical about a consumption-led rebound as that has not typically been the key driver to a growth recovery in China. Moreover, they are also concerned that the consumers might choose to hoard their excess savings rather than spend it, given that the excess saving was accumulated through unspent consumption rather than through government transfers,” Morgan Stanley said.

The Chinese growth recovery will benefit Japan in the form of increased tourist arrivals and goods export. In 2019, 30 per cent of Japan tourists arrived from China and about 19 per cent of its exports were to China, Morgan Stanley said.

In recent weeks, high-frequency data suggests improvement in Chinese tourist arrivals into Japan has picked up, having likely raised to 18 per cent of its pre-Covid levels as of the week of February 21, the report notes.

Similarly, the Korean economy that contracted sequentially in 4Q22 with broad-based weakness across all expenditure components is expected to benefit from China’s revival.

According to Morgan Stanley, Korean exports will have a modest recovery if there is pickup in China.

In the case of Indonesia, the demand indicators are fairly strong and the fall in the commodity prices is not much as the export prices are still 30-200 per cent higher than where they were before Covid.