Economy – Nomura Forecasts India’s Growth At Seven Percent In FY27

Economy –  India’s economy is expected to maintain steady growth over the next financial year, although rising geopolitical tensions and higher energy costs could create new challenges. Global financial services company Nomura has projected that the country’s economy will expand by about 7 percent in the financial year 2026–27, reflecting continued resilience despite a complicated international environment.

Growth Expected To Remain Stable

In its latest assessment, Nomura indicated that India’s economic momentum is likely to stay relatively strong even as global uncertainties persist. The projection of 7 percent growth for FY27 reflects a modest slowdown from the estimated 7.6 percent growth expected in FY26.

According to the report, the slight moderation in growth mainly reflects the potential impact of global energy market disruptions. Tensions in West Asia have already begun influencing oil and gas prices, raising concerns about possible economic spillover effects for several Asian economies.

Despite trimming its earlier growth forecast slightly, Nomura still views India as one of the stronger-performing major economies in the region.

Inflation Concerns Linked To Energy Prices

Economists at Nomura warned that rising fuel costs may push inflation higher in the coming year. The firm has increased its inflation projection for India in FY27 to 4.5 percent, up from its earlier estimate of 3.8 percent.

The report highlights that escalating geopolitical tensions are leading to higher energy prices across global markets. As India imports a large portion of its energy requirements, any sustained increase in oil and gas prices can directly affect domestic inflation levels.

Higher fuel prices tend to increase transportation and logistics costs, which can gradually pass through to other sectors of the economy. Businesses often adjust prices in response to higher operating costs, which can contribute to broader inflationary pressure.

External Balance May Face Pressure

Another area of concern highlighted in the report is India’s external balance. Nomura now expects the country’s current account deficit to reach 1.6 percent of GDP in FY27, which is about 0.4 percentage points higher than previously estimated.

A larger current account deficit generally reflects higher import costs relative to exports. Rising energy prices can widen this gap, especially for economies that rely heavily on imported crude oil and natural gas.

However, economists noted that the projected deficit remains manageable compared with levels seen during earlier global energy shocks.

Mixed Signals From Early 2026 Data

Initial economic indicators for the first quarter of calendar year 2026 show a mixed picture. On the positive side, domestic consumption and industrial activity appear to be holding up well. Strong demand from households and continued manufacturing activity have supported economic momentum.

At the same time, the report points out that exports and government spending appear somewhat weaker during this period. Global trade conditions and fiscal adjustments may be contributing to the softer outlook in these areas.

Economists also cautioned that disruptions in natural gas supplies—linked to geopolitical developments in West Asia—could affect both industrial production and service sector operations if shortages become prolonged.

Factors Supporting India’s Economic Recovery

Despite near-term risks, Nomura believes several structural and cyclical factors will continue to support India’s economic expansion. Previous policy easing measures, ongoing economic reforms, and steady wage growth are expected to sustain domestic demand.

In addition, easing trade tensions between India and the United States may provide some support for external trade in the coming years. These developments could help offset some of the pressures arising from global energy market volatility.

Fuel Costs Already Showing Impact

Rising energy prices have already begun influencing parts of the Indian economy. The government recently increased the price of liquefied petroleum gas, while reports of natural gas supply constraints have emerged in some sectors.

Nomura expects that higher fuel costs could eventually push up prices in transportation, hospitality, restaurants and other service industries. If these increases spread across the economy, they may contribute to higher overall inflation.

The report assumes that petrol and diesel prices will remain stable for the time being, with oil marketing companies absorbing some of the cost pressure. However, if international oil prices continue to rise and these costs are passed on to consumers, the inflation impact could become more visible.

Nomura estimates that every 10 percent increase in global oil prices could raise India’s inflation rate by roughly 0.5 percentage points.