New Delhi, May 13 (IANS). Morgan Stanley said on Wednesday that amid global instability, India’s real GDP growth is expected to be 6.7 percent in FY 27 and it may be 7 percent in FY 28. Also said that the Reserve Bank of India (RBI) will continue to promote growth by keeping interest rates stable.
It was told in the report that the maximum impact of tension in West Asia will be seen in the June quarter. Due to high commodity prices and disruptions in supply chains, the growth rate may remain at 6.5 percent during this period.
Upasana Chachra, Morgan Stanley’s chief economist in India, said, “Subsequently, as supply-side constraints ease and commodity prices stabilize, we expect a gradual normalization in activity and growth rates will be in line with trend by March 2027.”
Chachra further said, “However, global conditions remain volatile and the level of uncertainty remains high. Prolonged continuation of high oil prices could weigh on growth.”
The report estimates that growth will depend on domestic demand amid external uncertainty.
“Broadcast volatility remains, but prolonged supply disruptions and higher commodity prices are likely to reduce stability. Policy will remain supportive to minimize damage to growth,” the report said.
However, despite weak external conditions, activity indicators for April show strong domestic demand. The report said the ongoing conflict in the Middle East and high oil prices are likely to weigh on growth, but “we expect the results to be better than previously expected.”
“We continue to keep an eye on second-stage effects arising from weather and input availability and food inflation risks. Higher oil prices could widen the current account deficit to 1.8 per cent of GDP, while the balance of payments could remain in deficit for the third consecutive year due to reduced capital inflows, increasing currency sensitivity,” the economist said.
“We expect the RBI to keep interest rates unchanged in FY 2027 to balance growth and inflation risks posed by supply shocks,” he said. “To control external pressures and currency dynamics, the RBI will likely rely on non-interest rate measures, including tighter rules on foreign exchange (ODE) and steps to boost deposits and foreign exchange inflows by NRIs,” he said.
–IANS
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