(MENAFN- Trend News Agency)
Nomura has forecast India's GDP to grow at 7.2% in 2022, before
moderating to 5.4% in 2023. In a research note on Thursday, the
research firm said the 'prolonged mild recession' in the US can
lead to a slowdown in India, which has been recovering to a
pre-pandemic level. The rate hike by the Federal Reserve can also
dampen the investor spirit, it said, Trend reports citing Financial
Nomura released its Nomura India Normalization Index to track
the growth of various sectors in India. According to the index, the
service sector is above 40 percentage points (PP) as compared to
the pre-pandemic level. The country is seeing a broad-based
improvement across almost all the sectors including consumption,
investment, industry and the external sector, the note said.
Some of the areas that could worsen the economy's growth are
negative sentiment shock for consumers, supply chain disruptions,
worsening energy availability and tighter financial conditions.
The economic growth already faces headwinds from inflation,
which continues to remain higher than Asian peers.
“We view the RBI's new inflation forecast of 6.7% y-o-y for FY23
as optimistic and believe inflation is yet to peak, with our
projection being at 7.5%. We maintain our forecast for a terminal
repo rate of 6.25% by April 2023, with a 35 bps rate hike in
August, followed by 25 bps rate hikes in each of the following four
policy meetings. Risks appear skewed towards more front-loaded
hikes and higher terminal rates. We also expect 100 bps of CRR
hikes in the second half of 2022”, Nomura said.
According to the research firm, the economy is racing back to
above-normal levels, with consumption 14 pp above pre-pandemic
levels (PPL). Investment, industry and the external sector are also
doing significantly better compared with the pre-Covid period. The
key surprise has been the services sector which had been trailing 4
pp below PPL as of March but is now trending at close to 40 pp
above the PPL.“Overall, our measure of aggregate demand is now 35
pp above PPL and supply is around 17 pp above PPL”.
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