Morgan Stanley flags twin pressures: Oil and inflation
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New Delhi: Global geopolitical tensions are weighing on India’s economic outlook, but the country is expected to maintain steady growth, with GDP projected at 6.2% for FY2027, according to a Morgan Stanley report.
The estimate is lower than the earlier 6.5%, reflecting the impact of higher crude oil prices, expected to average around $95 per barrel. Rising energy costs are increasing production expenses, fuelling inflation, and putting pressure on the rupee. Economic growth may weaken in the near term, potentially dipping to 5.9% year-on-year in the June 2026 quarter due to softer industrial activity, tighter financial conditions, and shrinking profit margins. However, growth is expected to gradually recover as supply conditions improve and government support measures take effect.
Inflation is projected to average 5.1% in FY2027, driven by higher input costs, currency weakness, and firm food and goods prices. If oil prices exceed $110 per barrel, further inflationary pressure and fuel price hikes could follow. India’s external position is also likely to weaken, with the CAD projected to widen to 2.5% of GDP from about 1% earlier, mainly due to higher oil imports.
