Rupee shock may slow India: Kearney sees 1-1.5 percentage point West Asia hit on GDP

Global consulting firm Kearney has downplayed fears of the Indian rupee breaching ₹100 per dollar, arguing the country’s structural growth drivers—green energy, electronics manufacturing, data centers, and infrastructure—will mitigate external shocks. The firm forecasts India’s GDP growth could still decline by 1-1.5 percentage points over the next six to nine months if the West Asia conflict prolongs commodity inflation and supply-chain disruptions, though it expects the impact to be less severe than market predictions. Kearney’s analysis, shared during its ‘100 Years of Impact’ celebrations, notes the rupee’s recent dip to ₹97 against the dollar has revived concerns about imported inflation, but the firm rejects extreme depreciation scenarios like ₹120-140. Instead, it argues currency depreciation could boost export competitiveness, helping offset inflationary pressures. Executives including Bob Willen, Global Managing Partner, and Siddharth Jain, Managing Partner for India, emphasized that India’s diversified economy and domestic demand will support near-7% growth, even if global GDP faces a 1% contraction. The firm warns that businesses are underestimating risks beyond visible pressures like raw material shortages, including fertiliser shortages that could trigger food inflation and squeeze middle-class consumption. Sectors like fertilisers, commodity chemicals, and energy-intensive manufacturing face near-term stress from higher fuel and raw material costs. Jain highlighted that fertiliser shortages could reduce agricultural output, exacerbating inflationary cycles. Despite short-term challenges, Kearney remains optimistic about India’s long-term growth, citing a shift from outsourcing to diversified, infrastructure-driven expansion. Early signs of a private capital expenditure revival include large-scale manufacturing projects, with promoters investing in globally competitive facilities. The firm concludes that India’s structural resilience—backed by policy support and a growing domestic market—positions it stronger than many emerging economies to weather global turbulence.