India’s economy is expected to grow at 4.3% in December quarter this year amid concerns over crisis in the NBFC sector, according to Nomura.
The Japanese financial services major also believes that the first quarter of 2020 will see a “weak” uptick in GDP growth at 4.7%.
“Domestic credit conditions remain tight as market concerns in the shadow banking (NBFC banking) have persisted too long,” Sonal Varma, Chief Economist, India and Asia, said on Thursday.
Contrary to the market’s current optimism that growth has likely bottomed, Nomura believes it will slide further.
It expects 4.9% GDP growth in 2019, down from an earlier estimate of 5.3%, and 5.5% in 2020 against an earlier projection of 6.3%. In 2021, it sees India’s economic growth at 6.5%.
“On financial year basis, we expect GDP growth of 4.7% in FY20, and 5.7% in FY21, suggesting a delayed recovery and below-potential growth through end 2020,” Varma told a media briefing in Singapore.
The Reserve Bank is likely to slash key policy rates in the second quarter of 2020. However, the burden of growth heavy lifting now seems to be shifting to fiscal policies, she wrote in Nomura report “Asia 2020 Outlook”.
Moreover, the central bank will stay in pause mode in February 2020 as well, according to the report. The RBI kept repo rate unchanged at 5.1% in the December meet.
Nomura remains concerned about growth prospects, saying cyclical factors that were responsible for the slowdown look to persist well into 2020.
Moreover, the current phase of slowdown comes in the middle of a broader downturn in trend since 2016, driven by a slump in investments and employment opportunities.
“This has most likely led to the erosion of potential growth, suggesting that short-term surges in growth carry the risk of remaining shaken and unsustainable,” said the report.-PTI news
