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India's Economy to Grow 7% in FY27 Despite Geopolitical Risks: Nomura

Global financial firm Nomura forecasts India's economy will grow by 7% in the 2026-27 fiscal year, demonstrating resilience. The projection comes despite rising geopolitical tensions in West Asia which are increasing energy costs and inflationary pressures. The firm has raised its inflation forecast for India to 4.5% and expects a wider current account deficit. While early 2026 data shows strong consumption and industrial activity, risks from fuel supply shocks and weaker exports persist.

Key Points: Nomura Forecasts 7% Growth for India in FY27

  • 7% GDP growth forecast for FY27
  • Inflation outlook raised to 4.5%
  • Current account deficit may widen to 1.6% of GDP
  • Risks from West Asia tensions and energy costs
  • Strong consumption and industrial activity data
2 min read

Nomura forecasts 7 pc growth for India in FY27 despite geopolitical tensions in West Asia

Nomura projects India's economy to grow 7% in FY27, citing resilience despite West Asia tensions, though inflation and current account deficit forecasts are raised.

"India will continue to see a cyclical economic recovery supported by past policy easing, structural reforms, rising wages and easing trade tensions. - Nomura Report"

New Delhi, March 12

Global financial services firm Nomura has projected that India's economy will grow by 7 per cent in fiscal year 2026-27, remaining resilient despite rising geopolitical tensions in West Asia and concerns over higher energy prices.

However, the brokerage has slightly trimmed its earlier growth estimate while warning that prolonged conflict in the region could put pressure on inflation and the country's external balance.

The report, written by Sonal Varma, Chief Economist for India and Asia ex-Japan at Nomura, along with economist Aurodeep Nandi, noted that geopolitical tensions are increasing energy costs across the region. Higher fuel prices could push inflation upward in many Asian economies, including India.

Nomura has raised its inflation forecast for India in FY27 to 4.5 per cent from an earlier estimate of 3.8 per cent. The firm also expects India's current account deficit (CAD) to rise to 1.6 per cent of GDP, up by 0.4 percentage points from previous projections.

According to the economists, early data for the first quarter of calendar year 2026 suggests that consumption and industrial activity in India remain strong. However, exports and government spending appear to be weaker. They also warned that energy shortages, particularly natural gas supply disruptions due to geopolitical tensions in West Asia, could affect industrial and services activities in the country.

Despite these risks, Nomura believes India will continue to see a cyclical economic recovery supported by past policy easing, structural reforms, rising wages and easing trade tensions with the United States.

The economists said India's growth is expected to slow slightly to 7 per cent in FY27 from the estimated 7.6 per cent in FY26, mainly due to potential spillover effects from global fuel supply shocks.

Rising fuel costs are already being felt in India. The government has recently increased liquefied petroleum gas (LPG) prices, and there are reports of natural gas shortages. Nomura expects further price increases in sectors such as transport, restaurants, hotels and other services, which could push overall inflation higher.

However, the report assumes that petrol and diesel prices will remain unchanged for now, with oil marketing companies absorbing the shock. If fuel prices are passed on to consumers, Nomura estimates that every 10 per cent rise in oil prices could increase inflation by about 0.5 percentage points.

- IANS

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Reader Comments

S
Sarah B
Interesting analysis. The external factors are a real concern. A current account deficit of 1.6% isn't alarming yet, but we need to watch it. The strength in consumption is the key takeaway for me – it means domestic demand is holding up.
V
Vikram M
With all due respect to Nomura's forecast, I feel they are being a bit optimistic. The report itself mentions weaker exports and government spending. If global tensions escalate, 7% might be tough to achieve. Let's be cautiously hopeful.
P
Priya S
The natural gas shortage warning is worrying. It affects everything from factories to CNG vehicles and household cooking. We need to fast-track our renewable energy plans and reduce this dependency. Jai Hind!
R
Rohit P
Good to see the focus on rising wages and easing trade tensions with the US. That's the real growth engine for the middle class. If incomes go up, people will spend, and the economy will chug along. Fingers crossed for stable oil prices 🤞
A
Aurodeep Nandi
(Note: This is a simulated comment from the economist mentioned in the article) Thank you for reading our report. The key message is resilience with clear upside risks from geopolitics. The assumption on fuel passthrough is critical to watch.

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