Indian economic recovery likely to slow: Nomura

New Delhi, Feb 7 (IANS) India’s economic growth momentum is likely to slow down in the face of weak external conditions and sluggish investment demand, according to the Japanese financial services firm Nomura.

Nomura’s proprietary indices for India, together with the high frequency data, indicate some slowdown in the growth momentum towards end-2015 and a high likelihood of further monetary policy easing, it said in a research note.

There is a “downside risk” to its baseline forecast of 7.8 percent GDP growth in 2016, it said, adding that a reading still above 100 on the Nomura Composite Leading Index “suggests a mid-cycle consolidation, rather than the start of a downturn” in India.

“The economic recovery, which began in the fourth quarter of 2014, is headed into a consolidation zone into the second quarter of 2016,” Nomura said.

While improving urban consumption demand and a robust transportation sector are supporting growth, weak external conditions and sluggish investment demand are weighing on the pace of the recovery, it said.

The report also said the Reserve Bank of India (RBI) is expected to deliver a final 25 basis points rate cut in April, utilising the room afforded by lower commodity prices.

“Beyond that, we expect the RBI to stay on hold until end-2016. We will monitor our growth and policy indicators on a monthly basis for early signs of any further deterioration in growth outlook or possible room for further easing,” it said.

Earlier this week, RBI Governor Raghuram Rajan left the central bank’s short-term repo rate at which it lends to commerceial banks, unchanged at 6.75 percent, citing inflation risks and growth concerns, and saying further easing of monetary policy would depend on the government’s forthcoming budget proposals.

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