India: Growth and inflation forecasts revised higher – UOB

UOB's Jester Koh note they raise their FY27 Gross Domestic Product (GDP) forecast for India to 7.2% from 6.8% after a stronger-than-expected 1QFY27 expansion of 7.8% year-on-year. They also lift their FY27 headline inflation forecast to 5.2% from 5.0%, citing robust food price momentum, higher costs in services and energy, partly cushioned by subsidies and ample public foodgrain stocks.

Growth upgrade with stronger prices

“We raise our FY27 GDP forecast to 7.2% (from 6.8% prev.) following the strong 1QFY27 outturn (7.8% y/y; Bloomberg: 7.3%, 4Q: 8.6%).”

“We raise our FY27 headline inflation forecast to 5.2% (from 5.0%).”

“In our baseline projections, we pencil in several months of stronger m/m increases reflecting the impact of adverse weather-related events on food supply, although this would be partly mitigated by comfortable levels of public foodgrain stocks.”

“India's real interest rate would turn negative without further rate hikes, with inflation projected to exceed 6% y/y as early as Nov 2026.”