SBI Research Warns of Global Stagflation

A recent report by SBI Research forecasts a challenging global economic outlook, with downward revisions to GDP growth and intensifying inflationary pressures. This is primarily attributed to escalating geopolitical tensions in West Asia and severe supply chain disruptions, including the 'de facto closure' of the Strait of Hormuz. The report warns of potential stagflation risks, particularly if conflicts prolong until 2026, projecting a 1.2% higher inflation for G20 economies. For India, these global developments translate into significant macroeconomic pressures, with Crude oil prices remaining above $100/bbl leading to increased imported inflation, already at 5.4% and expected to rise further. The India===Indian rupee has also weakened beyond 93 per dollar, exacerbating external vulnerabilities. The report suggests that India's consumer price inflation (CPI) could remain above 4.5% for the next three quarters, despite the country's projected growth rate of 7.2% in FY27.