homeeconomy News

India presents a picture of 'short term despair amid medium term hope', according to Nomura

India presents a picture of 'short-term despair amid medium-term hope', according to Nomura

India presents a picture of 'short-term despair amid medium-term hope', according to Nomura
Profile image

By Pranati Deva  Jul 31, 2019 12:22:38 PM IST (Updated)

The global brokerage believes India's GDP growth is yet to bottom and expect it to further moderate to 5.7 percent in the June quarter from 5.8 percent in the March quarter.

The ongoing demand slowdown and liquidity crunch present a picture of 'short-term despair amid medium-term hope' for India, said global brokerage Nomura in a report.

Recommended Articles

View All

Nomura believes India's GDP growth is yet to bottom out and expects it to further moderate to 5.7 percent in the June quarter from 5.8 percent in the March quarter.
As per the global brokerage, high-frequency indicators suggest a further slowdown in economic activity in Q2, led by consumption and services, as a result of the ongoing shadow banking crisis and weak global growth.
Meanwhile, industry and investment indicators are relatively stable, it added.
"Going ahead, growth momentum is likely to pick up in the September quarter to 6.4 percent, which will further improve to 6.7 percent in Q4FY10," Nomura noted in the report, adding that the rebound will be on the back of higher industrial production growth and lower policy rates.
In the March quarter, the GDP growth slipped to a five-year low of 5.8 percent, thereby pulling down the overall GDP growth to a multi-year low of 6.8 percent
The Reserve Bank of India has also cut its key rates thrice by 0.25 percent each time to a nine-year low of 5.75 percent between February and June, and Nomura expects the central bank to reduce again next week in the August 7th monetary policy meeting.
"Because of tentative signs of growth bottoming out, 100 bps of cumulative rate cuts are likely to be delivered by end-August and a shift in banking system liquidity to surplus, we expect unchanged policy rates after August’s probable cut, as the Reserve Bank of India (RBI) will likely want to allow time for existing policy easing to be transmitted into the system," it noted.
According to the brokerage, June quarter remained a tough quarter for consumption indicators. On the urban side, passenger car sales contracted sharply and diesel consumption growth remained low, whereas, rural indicators such as two-wheeler and tractor sales growth also fell sharply.
The services sector was in much poorer shape, said Nomura. "The slowdown in the services PMI in June-quarter was more acute than the commensurate drop in the manufacturing index," it said.
Check out our in-depth Market Coverage, Business News & get real-time Stock Market Updates on CNBC-TV18. Also, Watch our channels CNBC-TV18, CNBC Awaaz and CNBC Bajar Live on-the-go!

Top Budget Opinions

    Most Read

    Market Movers

    View All
    Top GainersTop Losers
    CurrencyCommodities
    CompanyPriceChng%Chng