New Delhi, May 13 Morgan Stanley economists said on Wednesday they forecast India’s real GDP growth at 6.7 per cent in FY27 and 7 per cent for FY28 amid geo-political tensions, adding that the RBI policy measures would likely remain supportive to minimise damage to growth.
The West Asia energy shock is most pronounced in quarter ending June 2026, when growth troughs at 6.5 per cent YoY amid elevated commodity prices and lingering supply chain frictions.
“Thereafter, as supply-side constraints ease and commodity prices moderate, we expect a gradual normalisation in activity, with growth converging to trend by March 2027,” said Upasana Chachra, Chief India Economist at Morgan Stanley.
“That said, global conditions remain fluid, with elevated uncertainty. Sustained high oil prices could trigger non-linear and progressively larger impacts on growth, as the burden on households and firms intensifies over time, leading to cutbacks in consumption and investment,” Chachra added.
The report expects growth to hinge on domestic demand amid external uncertainty.
“While the starting point of macro stability is favourable, prolonged supply disruptions and elevated commodity prices are likely to erode stability. Policy will likely remain supportive to minimise damage to growth,” it noted.
Despite a weaker external backdrop, April activity indicators show resilience, supported by strong domestic demand. While the ongoing conflict and higher oil prices will likely weigh on growth, “we expect outcomes to exceed earlier expectations,” said report.
Urban demand, government capex on infrastructure/defence, and services exports should provide offsets. Commodity passthrough to CPI should remain limited, although WPI pressures may rise due to imported inflation and currency depreciation.
“We continue to monitor second-round effects and food inflation risks from weather and input availability. Higher oil prices could widen the current account deficit to 1.8 per cent of GDP, while slower capital inflows may keep the BoP in deficit for a third consecutive year, increasing currency vulnerability,” said the economist.
“We expect the RBI to remain on pause in FY27, balancing growth and inflation risks from the supply shock. To manage external pressures and currency dynamics, the RBI will likely rely on non-rate measures, including tighter ODI norms and steps to boost NRI deposits and FX inflows," she noted.
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