India’s economic pulse: Upasana Chachra decodes the next phase of growth

Upasana Chachra in an interview to ET Now said that India's macroeconomic environment is currently one of the strongest seen in recent times. Inflation is under control, GDP data for the March quarter exceeded expectations, the rupee remains stable, and bond yields are at comfortable levels. She credits effective macro management for ensuring this broad-based economic stability.

Chachra notes that while near-term growth momentum appears promising due to a favorable base and normalization of government spending, the broader outlook remains clouded. The key concern is a weakening in global demand, with Morgan Stanley forecasting global growth to decline from 3.5% in Q4 2024 to 2.5% by the end of 2025. She believes this will likely weigh on India's export and manufacturing activity, keeping GDP growth in the 6.0–6.2% range for upcoming quarters.

She believes that capex momentum in FY26 will primarily be driven by government and household investments. While some segments of private capex linked to infrastructure and PLI manufacturing have shown growth, overall private investment remains uneven. She explains that the uncertain global trade and tariff landscape is also dampening corporate capex sentiment. However, she highlights a strong rebound in government capex in March and April, which she expects to continue, helping support broader capital formation.

As per Upasana Chachra, inflation is expected to remain benign in the coming months. The average inflation for 2025 so far is around 3.6%, and the outlook is helped by favorable monsoon patterns. She points out that back-to-back strong monsoons are improving food supply and softening food inflation. On the non-food side, she sees no significant risks and forecasts inflation to remain in the 3.0–3.5% range, comfortably below the RBI’s 4% target.

Chachra maintains that the RBI’s policy bias will remain decisively on the easing side. With inflation consistently trending below 4%, she expects the RBI to continue supporting growth through further rate cuts and liquidity measures. Two rate cuts have already been implemented, and she anticipates another in the upcoming policy meeting, followed by one more in August. In her view, durable liquidity injections and an easing stance will persist as growth remains moderately cautious.

She confirms that Morgan Stanley is keeping its FY26 growth forecast for India unchanged at 6.2%. While she remains cautious due to the potential drag from slowing global demand, she highlights that India continues to stand out as one of the best-performing major economies. She adds that the magnitude of downward revisions to India’s growth outlook is relatively mild compared to other global economies facing external headwinds.

In summary, Upasana Chachra underscores that India’s macroeconomic setup is robust and resilient. With inflation under control, strong government capex, and healthy domestic demand, India is well-positioned to sustain moderate growth even amid global uncertainty. She believes that monetary easing, policy consistency, and favorable rural conditions due to strong monsoons will continue to reinforce the country’s economic foundations through FY26.