Global financial services firm Nomura has forecasted that India’s economy will expand by 7 per cent in the fiscal year 2026-27 (FY27), showing resilience amid escalating geopolitical tensions in West Asia and concerns about higher energy prices.
Nomura, in a report authored by Sonal Varma and economist Aurodeep Nandi, has adjusted its growth estimate slightly downward. The firm cautions that prolonged conflicts in the region could lead to inflationary pressures and impact India’s external balance.
The report highlights that rising geopolitical tensions are driving up energy expenses in the region, potentially elevating inflation rates in various Asian economies, including India.
Nomura has revised its inflation projection for India in FY27 to 4.5 per cent from the previous 3.8 per cent estimate. Additionally, the firm anticipates India’s current account deficit (CAD) to increase to 1.6 per cent of GDP, up by 0.4 percentage points from earlier forecasts.
Early data for the first quarter of the calendar year 2026 indicates robust consumption and industrial activity in India, although exports and government expenditure show signs of weakness. The economists caution that energy shortages, particularly disruptions in natural gas supply due to West Asian geopolitical tensions, could impact industrial and service sectors in the country.
Despite these challenges, Nomura remains optimistic about India’s economic recovery, attributing it to past policy relaxations, structural reforms, wage growth, and reduced trade tensions with the United States.
The economists project a slight deceleration in India’s growth to 7 per cent in FY27 from the estimated 7.6 per cent in FY26, primarily due to potential repercussions from global fuel supply disruptions.
Rising fuel prices are already affecting India, with recent hikes in liquefied petroleum gas (LPG) rates and reports of natural gas scarcities. Nomura foresees further price hikes in sectors like transportation, hospitality, and other services, potentially pushing overall inflation upwards.
The report assumes that petrol and diesel prices will remain stable for now, with oil companies absorbing the impact. If these costs are transferred to consumers, Nomura estimates that a 10 per cent surge in oil prices could raise inflation by approximately 0.5 percentage points.
