Morgan Stanley Trims India FY26 Growth Forecast to 6.1%
Why in the news
The global brokerage lowered its growth outlook for India because tariff and trade uncertainty is expected to weigh on demand and investment.
Key facts
- 2025-26 growth: 6.1% (cut by 40 bps).
- 2026-27 growth: 6.3%, from 6.5%.
- Trough: 5.7% in the December 2025 quarter.
- Inflation: benign, averaging 4% this financial year.
Forecast changes
| Year | Revised | Earlier |
|---|---|---|
| 2025-26 | 6.1% | 6.5% (implied by 40 bps cut) |
| 2026-27 | 6.3% | 6.5% |
Drivers
- Trade policy uncertainty dampens external demand and business sentiment, affecting the capex cycle.
- Lower food and oil prices keep food and non-food inflation in check.
Monetary policy
- RBI is expected to deliver a cumulative 100 bps cut in 2025, with two more cuts to come.
- A deeper downturn could bring extra easing and a pause in fiscal deficit consolidation for FY26.
Risks
- Outlook tilted to the downside, mainly from a sharper global slowdown.
- Capital flow and currency volatility could complicate policy.
- Growth could improve if tariff uncertainty is resolved, such as through a timely US-China trade deal.
Exam angle
- Brokerage: Morgan Stanley; FY26 forecast 6.1%.
- Expected cumulative easing: 100 bps in 2025.
- Quarter of weakest growth: December 2025 (5.7%).