Nomura Forecasts India’s GDP to Slow to 6.2% in FY26

Japanese brokerage firm Nomura has projected that India’s GDP growth will moderate to 6.2% in FY26, down from 6.5% in FY25, signaling a slowdown from the sharp 9.2% expansion recorded in FY24. The forecast, released on June 3, 2025, reflects increasing divergence between robust headline metrics such as GST collections and weaker indicators like automobile sales and bank credit growth.

Why in News?

This revision is significant as it contrasts with the Reserve Bank of India’s (RBI) estimate of maintaining 6.5% growth in FY26. Nomura’s more cautious outlook arrives amidst mixed economic signals and growing global uncertainties that may hamper India’s economic momentum and private investment cycle.

Key Projections and Economic Indicators

• FY24 GDP Growth: 9.2% (Post-COVID recovery momentum)
• FY25 GDP Growth: 6.5% (Official government data)
• FY26 Projection by Nomura: 6.2%
• RBI Estimate for FY26: 6.5% (No change from FY25)
• Nomura’s View: The deceleration is modest but signals a slowing economic trajectory, likely due to global factors and uneven domestic recovery.

Reasons for the Downward Projection

Divergence in economic indicators

• Positive: GST collections remain strong.
• Weak: Sluggish automobile sales, slow bank credit growth.
• Global uncertainties and delayed private investment cycle.
• Uneven recovery in consumer demand and industrial output.

Equity Market Implications

• Despite the GDP downgrade, Nomura raised its March 2026 Nifty 50 target from 24,970 to 26,140.

Cited reasons,

• Decline in yields
• Stable domestic flows
• India’s relatively low-beta equity profile
• Investor confidence despite earnings downgrades

Sectoral Outlook

• Overweight on domestic-oriented sectors (e.g., infrastructure, financial services).
• Cautious on exporters due to persistent global risks.

Contrasting Views

• BofA Securities: Warns Indian equity valuations look “full” in the short term.

Maintains positive long-term outlook due to,

• Infrastructure development
• Digitisation
• Financial inclusion
• Structural productivity gains