Financial firm Nomura cuts India’s growth forecast to 4.7% from 5.4% for 2022-’23
Japanese financial holding company Nomura lowered India’s growth forecast for the current fiscal year to 4.7% from its previous estimate of 5.4%, Trade standard reported Thursday.
The agency cited fear of recession and rising interest rates for its reduced projection.
“Exports have started to struggle, while high imports are pushing monthly trade deficits to record highs,” said Sonal Varma, chief economist for India and Asia ex-Japan at Nomura in a co-note. -written with Aurodeep Nandi. “Rising inflation, tighter monetary policy, sluggish private investment growth, the power crisis and slowing global growth pose medium-term headwinds.”
In India, inflation remained above the Reserve Bank of India’s upper tolerance level of 6% in 2022, with the inflation indicator hitting an eight-year high of 7.79% in April.
In June, the Reserve Bank of India’s monetary policy committee raised the repo rate by 50 basis points to 4.90% in a bid to control inflation. This was the second repo rate hike in five weeks. The repo rate is the interest rate at which the central bank lends to commercial banks.
In its latest estimate, however, Nomura said India’s economy is surging above its pre-pandemic level, driven by a strong recovery in the services sector, according to Trade standard.
The improvement was broad-based in consumption, investment, industry and the external sector, he said. The Japanese financial holding company expects inflation in India to average 6.9% in 2022 and 5.9% in 2023.
In June, US-based credit rating agency Fitch also lowered India’s growth forecast for the current fiscal year to 7.8% from its previous estimate of 8.5. % made in March. In the same month, the World Bank had also lowered India’s growth forecast for the current fiscal year to 7.5% from its earlier estimate of 8% announced in April.