Global brokerage firm Nomura said that the Indian economy is in its initial stages of recovery. It has also said that gross domestic product (GDP) growth is likely to increase to around 8 percent this fiscal as against 7.3 percent in the last financial year.
On GDP numbers, Nomura said one can paint both a bearish or bullish picture, but it’s in glass-half-full camp.
“Despite the scepticism, we are optimistic and continue to believe that the Indian economy is at the initial stages of a business cycle recovery,” Nomura said. It added lower inflation, easier financial conditions, policy efforts and rising profit margins are expected to back up a cyclical recovery.
According to Central Statistics Office (CSO) data, the Indian economy grew at 7.3 percent in 2014-15, up from 6.9 percent a year earlier.
Pegging the GDP growth at 8 percent this fiscal year, Nomura said key risks to this assumption are a bad monsoon and weak global demand.
It added, “We expect reserve Bank of India to cut the repo rate by 25 basis points to 7.25 percent on June 2, in line with the consensus, followed by a pause until end-2016.”
The central bank has lowered its policy rate twice outside the cycle in 2015, but kept it unchanged at its last review on April 7 due to fears of unseasonal rains impacting food prices.