West Asia conflict may trigger USD 800 bn capex boost for India, but oil and fertiliser risks remain: Morgan Stanley

The ongoing conflict in West Asia could emerge as both a challenge and an opportunity for India. Morgan Stanley projects a USD 800 billion cumulative investment boost over the next five years in energy, defence, fertilisers, and data infrastructure. This is expected to raise India's investment rate to 37.5% of GDP by 2030, with 60% of new capital expenditure directed toward energy transition, defence manufacturing, and data centres. Defence spending is projected to rise from 2% to 2.5% of GDP by FY2031, bolstering domestic production and manufacturing under the government’s indigenisation drive. India’s data centre sector may gain traction as global companies seek alternatives amid geopolitical uncertainty. However, the conflict introduces risks: India’s 85% crude oil import dependence and 50% natural gas reliance remain vulnerabilities. The fertiliser sector faces supply disruptions due to heavy reliance on imports for phosphatic and potassic fertilisers. The report advises a multi-pronged strategy to reduce external dependence, strengthen domestic buffers, and improve resilience. Additionally, remittances from Gulf-linked economies (38% of India’s inward remittances) could be affected by prolonged instability, though diversification is noted. Despite risks, Morgan Stanley remains optimistic, forecasting India’s real GDP growth at 6.5–7% due to capex-led expansion and structural reforms.