Nomura’s recent study indicates that India’s economic growth is likely to outperform expectations, with most market participants forecasting a GDP rise above 7% in the first quarter of FY27. The firm itself projects a 6.6% growth for FY27, noting that a robust Q1 performance could push the figure even higher.
Inflation expectations are mixed. While food inflation is expected to hit 8% in August‑September, driven by edible oil, pulses, vegetables and milk, core inflation is seen as muted. As a result, the consumer price index for FY27 is expected to hover around 5% or slightly lower.
The balance‑of‑payments outlook remains debated. Commercial banks anticipate foreign currency non‑resident deposits and external commercial borrowings to total $80‑90 billion. There is disagreement over whether India’s BOP challenges are cyclical or structural, especially with AI‑driven portfolio outflows and potential threats to IT services exports.
On monetary policy, most investors foresee a back‑ended shallow hiking cycle of 50‑75 basis points beginning in December. Nomura, however, believes that soft underlying inflation could lead to a policy hold for the remainder of this year and the next.
Artificial intelligence has emerged as a double‑edged sword. Enterprise AI adoption remains low and will require talent with localised knowledge, potentially boosting services exports. Yet low‑end coding jobs may disappear, posing significant reskilling challenges.
Nomura notes that sentiment has shifted from last year’s trade‑related nervousness to greater confidence in India’s growth, fiscal health and current‑account resilience. The focus now centers on AI trends, foreign investment uncertainties and job creation.
In summary, while India’s GDP outlook looks bright, investors and policymakers must navigate AI, employment and balance‑of‑payments risks to sustain momentum.
The research underscores the importance of monitoring inflation, monetary policy and external flows as India moves into FY27.
Overall, Nomura’s analysis offers a balanced view that growth can exceed expectations, but structural challenges require careful attention.