Global financial services firm Nomura has projected that India’s economy will grow by 7 per cent in fiscal year 2026-27 (FY27), 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.