India Faces Stagflation Threat Amid Rising Geopolitical Tensions: Nuvama Report

Nuvama Institutional Equities warns of potential stagflation risks in India owing to geopolitical tensions and a potential supply shock from the Iran crisis. Despite impressive growth in FY26, FY27 may present new challenges, with concerns about elevated input costs and inflation affecting the economy.

In the face of escalating geopolitical tensions and a looming supply crisis linked to Iran, India may encounter the risk of stagflation, according to a recent GDP analysis by Nuvama Institutional Equities. The potential economic threat looms, even as India closed its fiscal year 2026 on a note of unexpected growth strength.

The brokerage firm flags FY27 as potentially challenging, driven by ongoing geopolitical uncertainties that may elevate input costs and strain real income levels. The report highlights that India, already navigating through inflationary pressures, could experience stagflation if supply disruptions persist, compounded by a weak monsoon season.

Following a robust GDP growth of 7.8% in Q4FY26, Nuvama predicts a slower growth rate of 6-6.5% for FY27. They attribute this cautious outlook to rising oil prices connected to the Iran crisis, though domestic factors like strong credit growth and effective liquidity management might mitigate some risks.