Morgan Stanley Raises India FY27 GDP Growth Forecast to 6.7% Amid Lower Oil Price Outlook
New Delhi, May 13: Global financial services firm Morgan Stanley has revised India’s GDP growth forecast for FY27 upward to 6.7 per cent from its earlier estimate of 6.2 per cent, citing softer crude oil price expectations despite ongoing geopolitical tensions in West Asia.
The brokerage had previously projected crude oil prices to average $95 per barrel during FY27 but has now lowered the estimate to $87.5 per barrel. According to Morgan Stanley economists Upasana Chachra, Bani Gambhir and Shreya Singh, the energy shock is expected to peak in the June 2026 quarter before gradually easing through the fiscal year.
The report forecasts India’s economic growth to slow temporarily to 6.5 per cent in the June 2026 quarter due to elevated commodity prices and supply chain disruptions. However, easing supply-side pressures and moderating oil prices are expected to support a recovery, with GDP growth projected to touch 7 per cent in FY28.
Morgan Stanley warned that persistently high oil prices could create stronger pressure on households and businesses, potentially impacting consumption and investment activity over time. The brokerage also highlighted concerns around global trade and geopolitical uncertainty, especially regarding the India-US trade agreement and slower growth among major economies.
The firm expects global growth to moderate to 3.2 per cent in 2026 from 3.5 per cent in 2025, with weaker economic performance projected in the US and Europe likely to affect India’s export demand. Goods exports are expected to face greater pressure, although services exports may continue to provide support.
On the domestic front, the report noted that rural consumption has remained resilient for eight consecutive quarters, supported by healthy monsoons and lower inflation. However, emerging El Niño conditions and concerns over agricultural input availability could impact farm output and rural incomes in 2026.
Morgan Stanley also expects the Reserve Bank of India to maintain a pause on interest rates during FY27 while balancing inflation and growth concerns. In FY28, the brokerage expects a gradual rate hiking cycle with two 25 basis point hikes, taking the terminal rate to 5.75 per cent.
