Major global banks have raised their economic outlook for India, citing robust domestic demand and policy continuity, while also highlighting emerging inflationary risks. Standard Chartered and United Overseas Bank (UOB) both issued revised forecasts for the world's fifth-largest economy, reflecting growing confidence in its near-term prospects amid global headwinds.
Standard Chartered's revision was driven by stronger-than-expected consumption and investment data, a rebound in manufacturing and services activity, and a pickup in government infrastructure spending and private capital expenditure. The bank noted that easing inflationary pressures and a stable external account have reduced downside risks. It now projects India's GDP growth to exceed its previous estimate, aligning with other financial institutions that have turned more optimistic.
UOB's updated forecast also raised growth expectations for FY2025-26, reflecting robust domestic demand and resilient services activity, supported by high-frequency indicators like manufacturing PMI and infrastructure output. However, UOB simultaneously raised its inflation forecast, citing food price volatility and rising crude oil prices. The bank warned that the Reserve Bank of India (RBI) may need to keep interest rates elevated for longer, which could affect borrowing costs, bond yields, and the rupee's exchange rate.
Both revisions come ahead of the RBI's upcoming monetary policy meeting, where the central bank is widely expected to hold rates steady. The improved growth outlook gives RBI room to maintain status quo, but persistent price pressures create a delicate balance. For investors, the higher growth forecast signals continued earnings potential in Indian equities, while the inflation uptick could lead to tighter financial conditions. The RBI's policy path remains data-dependent, with upcoming inflation prints closely watched.
From a policy perspective, the government's focus on capital expenditure and infrastructure development is expected to support growth, but fiscal prudence remains a constraint. The revisions reinforce India's position as a preferred emerging-market destination and enhance its appeal to foreign investors. However, global uncertainties—including commodity price volatility and tighter financial conditions—still pose risks. The outlook also assumes no major external shocks and a normal monsoon season, which remains a key variable for rural demand.
