Standard Chartered’s India economists Anubhuti Sahay and Saurav Anand cut India’s FY27 GDP growth forecast to 6.4% from 7.0% and FY26 to 7.3% from 7.6%, citing elevated energy prices and Middle East tensions. They now see higher CPI inflation at 4.7% in FY27, a wider C/A deficit, persistent BoP shortfalls and a risk of RBI rate hikes if global yields rise further.

Higher energy costs hit growth and BoP

"We revise our macro forecasts amid the ongoing Middle East conflict and the likelihood of a prolonged period of elevated energy prices."

"We lower our GDP growth forecast for FY27 to 6.4% from 7% and for FY26 to 7.3% from 7.6%."

"However, we are more concerned about the external sector if energy prices stay elevated for a sustained period."

"We maintain our call for the Monetary Policy Committee (MPC) to stay on hold as a rise in inflation is likely to remain well within the mandated inflation band of 2-6%."

"However, we acknowledge the risk of a 25-50bps increase in the repo rate if a sustained rise in energy prices (crude oil prices above USD 100/bbl) pushes global rates higher, putting further pressure on the Indian rupee (INR)."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)