Morgan Stanley has cut India’s growth forecast to 6.2% from 6.5% for FY27 and increased the inflation forecast to 5.1% from 4% citing the ongoing war in West Asia might lead to elevated energy prices and supply-side constraints. It had previously tracked upside risks, forecasting real GDP growth at 7.4% for Q4FY26 and approximately 7% for FY27.
The brokerage said in its latest note that the country’s current account deficit is likely to widen to 2.5% of GDP from the 1% projected earlier. These projections are based on crude prices at $95 per barrel in FY27.
What happens if oil prices spike more?
However, if oil prices spike to $150 a barrel for a quarter, the brokerage projects GDP growth at 5.7%, retail inflation breaching 6% and the current account deficit widening to 3% of GDP.
Earlier, Moody’s Ratings had trimmed India’s growth outlook for the current fiscal year to 6% from the 6.8% estimated earlier, flagging rising risks from the ongoing conflict in West Asia.
Goldman Sachs lowered its 2026 growth forecast for India to 5.9% from 7% before the conflict. In contrast, S&P Global Ratings took a more optimistic view, raising its projections by 40 basis points (bps) to 7.1% for FY27. The divergence reflects the high degree of uncertainty surrounding the crisis’s duration and intensity.