Nomura sees current account deficit 4.2%

"While firms usually build inventory pre-festival seasons, we believe that power outages may have constrained production this year, resulting in firms drawing down on inventory to meet demand.

"This trend likely continued in October as the stock of finished goods index. In addition, consumer non-durables output growth moderated sharply reflecting lower summer crop production," Nomura said.

Stating that growth is bottoming-out, and not falling, it said growth in the intermediate goods output, a precursor to final demand, remains positive and, on a three-month moving average basis, IIP growth was 0.5 per cent y-o-y in September from a trough of minus 0.7 per cent in May.

Also, excise mop-up accelerated by 17.5 per cent in September from 0.3 per cent in April. Similarly, import growth, excluding oil and gold, is also trending higher.

"Therefore, we believe that the IIP data may be overestimating the growth slowdown. More likely, we believe that the industrial cycle is bottoming-out. Unlike the past, we expect a longer period of consolidation in this cycle due to weak exports, lacklustre investments and moderating consumption demand."