PostgreSQL’s client connects to a database named after the user by default.
This is why you get the error FATAL: database "nishant" does not exist.
You can connect to the default system database postgres and then issue your query to create the new database.
con = connect(dbname="postgres", user="nishant", host="localhost", password='everything')
Make sure your nishant user has permission to create databases.
Edit: By the way, check out the ~/.pgpass file to store password securely and not in the source code (http://www.postgresql.org/docs/9.2/static/libpq-pgpass.html). libpq, the postgresql client librairy, check for this file to get proper login information. It’s very very handy.