India: Expansion slows as energy crisis impacts – Standard Chartered

Standard Chartered Revises India’s Economic Outlook Amid Rising Energy Prices

Anubhuti Sahay and Saurav Anand, economists at Standard Chartered, have adjusted their projections for India’s GDP growth, lowering the estimate for FY27 to 6.4% from the previous 7.0%, and for FY26 to 7.3% from 7.6%. This revision is attributed to persistently high energy costs and ongoing instability in the Middle East.

They now anticipate consumer price inflation (CPI) to reach 4.7% in FY27. Additionally, they expect a larger current account deficit, continued balance of payments challenges, and warn of the possibility that the Reserve Bank of India (RBI) may be compelled to raise interest rates if global yields continue to climb.

Impact of Elevated Energy Prices on Growth and External Balance

According to the economists, the ongoing conflict in the Middle East and the prospect of sustained high energy prices have prompted them to revise their macroeconomic forecasts.

• GDP growth for FY27 is now projected at 6.4%, down from 7%.
• FY26 growth expectations have been trimmed to 7.3%, compared to the earlier 7.6% forecast.

They express particular concern about the external sector, noting that prolonged high energy prices could significantly impact India’s economic stability.

Despite these challenges, the economists believe the Monetary Policy Committee (MPC) is likely to keep rates unchanged, as inflation is expected to remain within the official 2-6% target range.

However, they caution that if crude oil prices remain above USD 100 per barrel and global rise further, there is a risk that the RBI may need to increase the repo rate by 25-50 basis points to support the Indian rupee.