Nomura financial services says India’s recovery is going to be slow

Nomura financial services says India's recovery is going to be slow
Nomura financial services says India's recovery is going to be slow

    New Delhi

    [dropcap color=”#008040″ boxed=”yes” boxed_radius=”8px” class=”” id=””]I[/dropcap]t was forecast a year ago… India was trying creative ways to dress up its growth so it would look like the premier destination for Global investment. While the new method of calculating the Gross Domestic Product (GDP) drew mixed comments, Forbes magazine commented that they’re now calculating the value that consumers get to enjoy and not the value that producers are consuming and that this was the right way to calculate the GDP.

    The Indian statistics ministry said that after updating the base year used for marking trends in the economy and switching to a market-price calculation of gross domestic product, the GDP number went up from 4.7% to 7.4%. They followed it up with the following statement:

    India now measures GDP by market prices instead of factor costs, to take into account gross value addition in goods and services as well as indirect taxes. The base year has been shifted to 2011/12 from 2004/05 earlier.

    Unfortunately for India, this can be done only once. Real work had to be done in the Fiscal Year 2015 and due to a variety of reasons, growth has not been as stellar as India might have hoped. As the Government prepares to deliver its next budget, ratings agencies are beginning to weigh:

    [dropcap color=”#008040″ boxed=”yes” boxed_radius=”8px” class=”” id=””]I[/dropcap]ndia’s economic growth momentum is likely to slow down in the face of weak external conditions and sluggish investment demand, according to the Japanese financial services firm Nomura.

    Nomura’s proprietary indices for India, together with the high frequency data, indicate some slowdown in the growth momentum towards end-2015 and a high likelihood of further monetary policy easing, it said in a research note.

    There is a “downside risk” to its baseline forecast of 7.8 percent GDP growth in 2016, it said, adding that a reading still above 100 on the Nomura Composite Leading Index “suggests a mid-cycle consolidation, rather than the start of a downturn” in India.

    “The economic recovery, which began in the fourth quarter of 2014, is headed into a consolidation zone into the second quarter of 2016,” Nomura said.

    [dropcap color=”#008040″ boxed=”yes” boxed_radius=”8px” class=”” id=””]W[/dropcap]hile improving urban consumption demand and a robust transportation sector are supporting growth, weak external conditions and sluggish investment demand are weighing on the pace of the recovery, it said.

    The report also said the Reserve Bank of India (RBI) is expected to deliver a final 25 basis points rate cut in April, utilising the room afforded by lower commodity prices.

    “Beyond that, we expect the RBI to stay on hold until end-2016. We will monitor our growth and policy indicators on a monthly basis for early signs of any further deterioration in growth outlook or possible room for further easing,” it said.

    Earlier this week, RBI Governor Raghuram Rajan left the central bank’s short-term repo rate at which it lends to commerceial banks, unchanged at 6.75 percent, citing inflation risks and growth concerns, and saying further easing of monetary policy would depend on the government’s forthcoming budget proposals.

    (Some content from IANS)

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