India’s FY27 GDP Growth Seen Slowing Amid Oil Shock, Says Nuvama
Escalating tensions in West Asia and the resulting surge in crude oil prices have prompted Nuvama Research to slash its FY27 GDP growth forecast for India to 6–6.5 per cent, warning that persistent supply-side shocks and inflationary pressures could undermine economic momentum despite the country's robust 7.7 per cent expansion in FY26. The brokerage expects geopolitical uncertainties, coupled with the risk of a weak monsoon, to emerge as key challenges for Asia’s third-largest economy in the current fiscal year, according to Nuvama Research.In its latest macroeconomic assessment, the brokerage said India’s economy remained resilient through FY26, with real GDP growth accelerating to 7.7 per cent from 7.1 per cent in FY25, supported by stronger consumption and investment activity. However, it cautioned that the external environment has become significantly more challenging, increasing risks to growth prospects.
According to the report, economic activity remained largely stable in the fourth quarter of FY26. Real GDP expanded by 7.8 per cent year-on-year, exceeding expectations, while nominal GDP growth remained subdued at 9.1 per cent, marking the seventh consecutive quarter of expansion below 10 per cent. Investment activity strengthened during the quarter, although private consumption growth moderated and net exports continued to drag on overall growth.
On the supply side, agriculture growth improved to 3.6 per cent in Q4 FY26 from 1.7 per cent in the previous quarter, largely due to a favourable base effect. Industrial growth moderated to 7.3 per cent from 9.5 per cent, while services activity remained robust and stable. Private consumption growth eased to 7.1 per cent from 8.2 per cent in the preceding quarter, whereas gross fixed capital formation accelerated sharply to 10.8 per cent.
Reviewing the full fiscal year, Nuvama described FY26 as “a year of two halves”, with economic momentum strengthening significantly in the latter part of the year. While nominal GDP growth slowed to 8.9 per cent from 9.7 per cent in FY25, real GDP growth accelerated due to stronger manufacturing and services performance. Manufacturing growth rose to 10.7 per cent from 9.3 per cent, while services growth improved to 9.3 per cent from 7.9 per cent. Agriculture growth, however, slowed to 3 per cent from 4.2 per cent a year earlier.
The report noted that both investment and consumption strengthened during FY26. Real investment growth increased to 8.2 per cent from 6.4 per cent in FY25, while private consumption growth accelerated to 7.7 per cent from 5.8 per cent, helping maintain stable shares of both components in overall GDP.
Looking ahead, Nuvama warned that FY27 could prove considerably more difficult. The brokerage said heightened geopolitical tensions are likely to keep input costs elevated, while a prolonged supply shock and the possibility of a weak monsoon could create stagflationary pressures.
“FY27 is likely to be a challenging year, beginning with heightened geopolitical tensions that could keep input costs elevated and weigh on real income,” the report said. It added that a prolonged supply shock, particularly alongside a weak monsoon, could increase inflationary pressures and slow economic growth.
Despite the concerns, Nuvama believes the downside risks could be partly mitigated by the Reserve Bank of India’s liquidity and interest-rate management, a relatively competitive rupee and healthy credit growth trends. While it has reduced its real GDP growth forecast, the brokerage expects nominal GDP growth to accelerate to 11–12 per cent in FY27 due to higher inflation and nominal activity.
The report concludes that India’s macroeconomic fundamentals remain relatively strong, but the evolving geopolitical landscape and energy price volatility will be key factors determining the pace of growth in the coming quarters.
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