India: Both inflation and the trade deficit surprised higher in June: For FY27, we forecast inflation at 4.6%, the CAD at 1.2% of GDP and an extended RBI hold.

Research evidence excerpt

India: Both inflation and the trade deficit surprised higher in June: For FY27, we forecast inflation at 4.6%, the CAD at 1.2% of GDP and an extended RBI hold.

Nomura | Asia Insights 14 July 2026

Inflation forecasts

Based on the daily data available so far in the month, we estimate inflation is tracking at

~4.0% y-o-y in July, down from 4.4% in June. We recently reduced our FY27 CPI inflation

forecast to 4.6% from 5.0%, below the RBI’s forecast of 5.1%. We see inflation crossing

~5.0% by Q3 FY27 (October-December), buoyed by an exceptionally low base.

A balance of payments surplus is likely

We recently reduced our FY27 current account deficit forecast to 1.2% of GDP from 1.9%,

primarily to reflect lower crude oil prices, continued restrictions on gold/silver imports,

strong remittances, a relative resilience to US trade tensions and the absence of

extraordinarily high US tariffs.

On the capital account side, policymakers have rolled out a bazooka of measures to

attract foreign inflows, including FCNR(B) deposit incentives, concessional External

Commercial Borrowing (ECB) swaps and tax relief for FPIs investing in government

securities (see India:Policybazookaformanagingcurrencyprudentlyleavesoutpolicy

rate, 5 June 2026). FCNR(B) flows in the first month seem encouraging (see India:

FCNR(B)inflowsareofftoahealthystart, 3 July 2026), even as market confidence

around the extent of inflows has reduced of late. In our baseline view, the scheme leads to

inflows of around USD55bn in FY27. Along with other measures, we see the balance of

payments swinging from a large deficit to a surplus of over USD40bn, up from our

previous forecast for a deficit of ~USD70bn (see India:BoPswings–fromdeficitto

surplus, 19 June 2026).

The RBI is likely on extended hold