Indian economy to gradually recover in 2015, to clock 5.5 pct GDP growth: Nomura

By: |
New Delhi | January 05, 2015 2:34 PM

Recovery is likely to get support from easing inflationary pressures and measures towards economic reforms...

Indian economy, India GDP growth, manufacturing PMIIndia’s manufacturing PMI rose to a two-year high in December, led by rise in both domestic and export new orders (Reuters)

A gradual recovery is underway for the Indian economy and the country is expected to clock a GDP growth of 5.5 per cent in the current fiscal and 6.6 per cent in FY16, says a Nomura report.

According to the global financial services firm, the recovery is likely to get support from easing inflationary pressures and measures towards economic reforms.

India’s manufacturing PMI rose to a two-year high in December, led by rise in both domestic and export new orders, while output growth from six core infrastructure industries rose 6.7 per cent y-o-y in November — all suggesting a likely rebound in November industrial production, the Japanese brokerage firm said.

“We expect the economy to gradually recover in 2015 with real GDP growth of 5.5 per cent y-o-y in FY15 (year-end March 2015) and 6.6 per cent in FY16,” Sonal Varma, India economist at Nomura, said in a research note.

On prices, the report said input costs have moderated due to lower commodity prices, which along with still-subdued demand, has kept output prices stable.

Nomura, however, noted that the period of a positive base effect on CPI inflation is over and CPI inflation is expected to rise from 4.4 per cent y-o-y in November to 5.5-6.0 per cent in the next three months, before moderating back towards 5 per cent after March.

“Overall, we expect CPI inflation to undershoot the RBI’s January 2016 target of 6 per cent. We pencil in a 25 bp repo rate cut in both April and June (to 7.5 per cent), followed by a pause,” Varma added.

RBI Governor Raghuram Rajan in the monetary policy review meet in December, 2014, had kept interest rate unchanged, saying that a shift in stance is ‘premature’ but hinted that a cut may come early next year if inflation continues to ease and government acts on the fiscal side.

Accordingly, the repo rate continues to be at 8 per cent while the cash reserve ratio has also been retained at 4 per cent.

Do you know What is Cash Reserve Ratio (CRR), Finance Bill, Fiscal Policy in India, Expenditure Budget, Customs Duty? FE Knowledge Desk explains each of these and more in detail at Financial Express Explained. Also get Live BSE/NSE Stock Prices, latest NAV of Mutual Funds, Best equity funds, Top Gainers, Top Losers on Financial Express. Don’t forget to try our free Income Tax Calculator tool.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1PM-KISAN benefits reach WB farmers; 7.03 lakh farmers get 1st installment of Rs 2,000 each
2PM Modi’s Akshaya Tritya bonanza for farmers, Rs 20,000 crore under PM-KISAN scheme directly transferred to nearly 10 crore farmers
3Stuck realty projects get Rs 18,000 cr from SWAMIH fund