Morgan Stanley warns India stagflation
Analysis based on 8 articles · First reported Mar 30, 2026 · Last updated Mar 30, 2026
The report by Morgan Stanley indicates potential stagflationary risks for India's economy due to geopolitical tensions in the Middle East, which could lead to volatility in global commodity prices and impact India's external sector. This outlook may cause investors to re-evaluate their positions in Indian equities and bonds, potentially leading to a cautious market sentiment.
Morgan Stanley released a report on India's economic outlook, stating that while domestic demand remains resilient, rising geopolitical tensions in the Middle East pose significant risks, including the possibility of stagflation. The report highlights that India's macroeconomic stability indicators are currently favorable, with broad-based improvements in auto sales, credit growth, and GST collections. Manufacturing PMI has improved, though services PMI has moderated. The labor market is showing signs of improvement, and corporate performance remains steady. Financial flows, including monthly SIP flows and funds to the commercial sector, are supportive. The State Bank of India has proactively managed liquidity, maintaining a policy rate of 5.25 percent. However, India remains vulnerable to external shocks from the Middle East, particularly concerning global commodity prices, as the region accounts for 15 percent of India's exports and 38 percent of its remittances.
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