India economic outlook faces risks from AI slowdown and export hurdles

India’s economic recovery faces several structural and external risks, according to recent reports from Nuvama Institutional Equities and HSBC Global Investment Research.

Nuvama warns that an oil supply shock could impact corporate margins starting in Q2FY27. Additionally, the report suggests the artificial intelligence (AI) investment boom may be losing momentum due to rising chip costs, increased competition from China, and weakening cash flows. The firm noted that stagnation in hardware technology stocks could be a late-cycle sign similar to the period preceding the dot-com bubble burst. Rising global bond yields and a hawkish Federal Reserve may further pressure risk assets.

Separately, HSBC Global Investment Research highlighted that India’s recent currency depreciation has not triggered a strong export recovery because of a “missing middle” in mid-technology and intermediate goods. While high-tech exports like electronics have responded well to a weaker rupee, mid-tech sectors such as textiles, footwear, and plastics have shown negligible response. The report suggests that lowering export tariffs and finalizing trade deals, such as those with the EU and UK, could help improve export competitiveness and address the persistent trade deficit.