Nomura predicts fall in India's GDP growth in March quarter

Japanese financial services major Nomura has predicted that India's GDP growth would fall to 6.7% in the March quarter; however, it was also hopeful of a gradual recovery to around 7.7% in 2018, because of higher consumption and public spending.

The fourth quarter of 2016 saw a GDP growth rate of 7%.

"However, we expect GDP to average 7.3 per cent in the second half of 2017 and 7.7 per cent in 2018 supported by higher consumption (state pay hikes, remonetisation, lower lending rates) and public spending," said a research note from Nomura.

The report added that demonetisation drive of the Indian government has severely hurt industrial activity, even as the impact is temporary.

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"In our view, the recovery in industrial production should gather momentum through 2017 supported by ongoing remonetisation, release of pent-up consumption demand, lower lending rates, higher public capex and impending pay hikes for state government employees," Nomura added.

Talking of RBI's monetary policy, the report said that RBI is likely to stay firm all through 2017 because of its view of a growth recovery and a pick-up in the inflation during the second half of this year. It added that early 2018 could see a hike in these rates.

During its monetary policy review meet on April 6th, RBI didn’t change the repurchase or repo rate, but increased reverse repo rate and lowered the Marginal Standing Facility by 0.25% each.

(Image source Medical Daily)