Morgan Stanley revises growth forecast for India upwards to 6.7%

Morgan Stanley has revised the growth forecast for India upwards to 6.7 per cent from its April 2026 projection of 6.2 per cent despite geopolitical concerns in West Asia.

It has earlier predicted crude oil prices to average $95 per barrel (bbl) in FY27 with gas availability as an additional constraint. Now, the crude oil forecast has been revised downward to $87.5/bbl.

Advertisement

“In our base case, we expect global oil prices to peak in quarter ending June 2026 (QE Jun-26) and average $87.5/bbl in FY27. We forecast GDP growth of 6.7 per cent YoY in FY27 and 7 per cent in FY28, with the energy shock most pronounced in QE Jun-26, 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,” wrote Upasana Chachra, Chief India Economist at Morgan Stanley in a recent coauthored note with Bani Gambhir and Shreya Singh.

The analysts said, external demand will likely remain uneven, contingent on the duration of the ongoing geopolitical conflict and progress on the India–US trade agreement.

In a prolonged tension scenario, Morgan Stanley expects the first-round trade impact to materialise through sequential weakness in exports, driven by slower global growth and trade, compounded by higher freight and insurance costs.

Recently, Moody’s Ratings has slashed India’s GDP growth forecast for year 2026 by 0.8 percentage points to 6 per cent amid higher energy costs. The cut in growth forecast is primarily on subdued private consumption, capital formation, and industrial activity amid higher energy costs.

“The global outlook remains highly uncertain amid an increasingly prolonged confrontation and fragile ceasefire between the US and Iran, We estimate growth losses ranging from around 0.8 ppt for India,” Moody’s said.

In its Global Macro Outlook May update, Moody’s said over the next six months, the impact from higher energy prices and fuel and fertilizer-related shortages will vary widely across countries, reflecting differences in exposure and resilience.

As a net grain producer, agricultural exports will benefit in the near term from higher prices, but higher fuel and fertilizer costs would weigh on government finances, potentially constraining planned capital spending, it said. Further, Coal powers about 70 per cent of India’s electricity generation, while non-fossil sources continue to expand.