BofA cuts India growth forecast, flags rising inflation risks

Investing.com -- Bank of America has cut its Indian growth forecast and raised its inflation projections, warning that a prolonged energy price shock from the Middle East conflict is beginning to leave visible marks on the country’s economy.

BofA economist Rahul Bajoria reduced the bank's fiscal year 2027 GDP growth forecast to 6.5% from 7%, while lifting its inflation projection to 5.2% from 4.7%, citing a revised crude oil price baseline of $92.50 per barrel versus a prior assumption of $77.50.

The bank warned of further downside risk, noting "1-2pp downside risk to our growth projections" if the conflict intensifies or drags on.

Early high-frequency data from March is said to point to emerging stress. Manufacturing PMI fell to its lowest level since June 2022, with cost inflation at a 43-month high.

International air traffic declined 18% year-on-year in March following a rise in aviation turbine fuel prices, while vehicle sales and credit growth continued to hold up.

BofA flagged worsening terms of trade as a key transmission channel, with higher energy costs expected to feed through to wholesale prices over a one-to-three month horizon.

On monetary policy, BofA now expects the Reserve Bank of India to shift to a more hawkish stance. "We build in 50 basis points of rate hike in FY27 by RBI basis our current growth-inflation dynamics," Bajoria wrote

You May Also Be Interested In

• Citigroup set to join top banks in Anthropic IPO - Bloomberg
• BofA Securities Upgrades Moderna (MRNA) to Neutral
• ICE raises $3.71 billion in senior notes to fund MarketAxess deal