Mumbai: Nomura has forecasted India’s growth to sharply slow down to 5.2% in 2023-24 from 7% in the current fiscal due to the spillover effect of global slowdown.
The Japanese brokerage batted for policy vigilance amid the global headwinds, and underlined that macro stability should be the priority, more than growth.
“The mood on India’s GDP growth outlook is relatively positive, with risks mainly seen from weaker global demand,” Nomura said in a note released on Friday.
A note from its economists Sonal Verma and Aurodeep Nandi after week-long meetings with policymakers, corporates, commercial banks and political experts said the broader impression from the meetings was one of relative comfort on the domestic macro outlook, but with a lot of global uncertainty.
“There is optimism on India: both in the near term (better placed relative to other economies) and in the medium term (sound fundamentals, new growth drivers),” it said, adding that the optimism in FY24 may be misplaced and that spillover effects from the global slowdown are being underestimated.
The economy grew at 4% in FY20 in a multi-year low. The estimated slowdown in growth in FY24 will come ahead of the next general elections.
Nomura expects inflation to average at 6.8% in FY23, a tad above the Reserve Bank of India’s 6.7% estimate, and cool down to 5.3% in FY24. “We share the consensus view that inflation will remain elevated in the foreseeable future and core inflation will remain sticky,” it said.
On the fiscal consolidation front, it said expenditure cuts would be necessary to meet the 6.4% fiscal deficit target for FY23 and added that it was “circumspect” about a sub-6% target for FY24.
The brokerage said it expects the RBI to go for a 35 basis points hike at the December meeting and deliver a 25 basis points increase in February to take the terminal repo rate to 6.50%. The RBI has raised repo rate by 190 basis points since May to tame inflation.
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