New Delhi, March 30 -- India's economic outlook remains supported by strong domestic demand and improving high-frequency indicators, but rising geopolitical tensions, particularly in the Middle East, pose significant risks, including the possibility of stagflation, according to a report by Morgan Stanley.

The report noted that "domestic demand remains resilient; however, headwinds are emerging as ongoing geopolitical tensions create a stagflationary risk," adding that while macroeconomic stability indicators are currently favourable, "prolonged disruption poses downside risks to growth and could worsen macro stability."

High-frequency indicators highlighted in the report suggest broad-based strength in the economy. There has been a broa...