UOB's Jester Koh has revised India's economic outlook, raising the FY27 Gross Domestic Product (GDP) growth forecast to 7.2% from the previous estimate of 6.8%. This adjustment follows a stronger-than-expected expansion in the first quarter of FY27, where GDP grew by 7.8% year-on-year, surpassing Bloomberg's consensus estimate of 7.3% and following an 8.6% increase in the previous quarter [1].
In addition to the growth upgrade, UOB also increased its FY27 headline inflation forecast to 5.2%, up from 5.0%. The upward revision is attributed to robust food price momentum and higher costs in services and energy. However, these pressures are expected to be partly cushioned by government subsidies and ample public foodgrain stocks [1].
UOB's baseline projections anticipate several months of stronger month-on-month inflation increases, reflecting the impact of adverse weather events on food supply. The report also warns that India's real interest rate could turn negative without further rate hikes, as inflation is projected to exceed 6% year-on-year as early as November 2026 [1].
CONCLUSION
UOB's upward revisions to both GDP and inflation forecasts for India highlight robust economic momentum but also rising price pressures. The outlook suggests potential challenges for monetary policy, with the risk of negative real interest rates if inflation continues to accelerate. Market participants may need to monitor inflation trends and central bank responses closely.