Morgan Stanley has revised India's fiscal year 2027 growth outlook down to 6.2%, a decrease of 30 basis points, primarily due to supply-side disruptions and cost pressures stemming from the ongoing Gulf conflict. The report anticipates inflation to rise to 5.1%, compared to a previous estimate of 4%, while the current account deficit (CAD) is expected to widen to 2.5% of gross domestic product (GDP). Key sectors such as pharmaceuticals, textiles, and toys are experiencing margin pressures due to rising oil and gas costs, which are being transferred from refiners. Labour-intensive industries, particularly textiles, are already facing job losses as they struggle with limited pricing power. Should oil prices surge to $150 per barrel for a quarter, GDP growth could further decline to 5.7%, inflation may exceed 6%, and the CAD could expand to 3% of GDP. Morgan Stanley highlights that the geopolitical conflict is creating a terms of trade shock for India, with rising energy import costs impacting production expenses and inflation, while also putting pressure on the Indian Rupee. The Reserve Bank of India is expected to maintain policy rates at 5.25%, but may resort to interest rate hikes if the rupee remains unstable amid high oil prices.