RBI to keep Feb rates unchanged
Japanese investment banking group Nomura expects Indian economy to continue the slower growth process, saying the current phase comes in the middle of a broader downturn in trend since 2016, driven by a slump in investments and employment opportunities.
It also sees the cyclical factors responsible for the slowdown look to persist well into 2020.
Projecting quarterly growth on 12 Dec 2019, Nomura sees fourth quarter growth at 4.3% and a weak uptick to 4.7% in the first quarter of 2020.
“Domestic credit conditions remain tight as market concerns in the shadow banking have persisted too long,” said Nomura chief economist for India and Asia Sonal Varma.
Contrary to the market’s current optimism that growth has likely bottomed, Nomura believes growth will slid further.
Nomura expects 4.9% GDP growth in 2019, down from earlier consensus of 5.3%, and 5.5% in 2020 against a consensus of 6.3%. In 2021, it sees Indian economic growth at 6.5%, second highest in Asia after 6.8% projected for the Philippines.
“On a financial year basis, we expect GDP growth of 4.7 per cent in FY 2020, ending March 2020, and 5.7 per cent in FY21, suggesting a delayed recovery and below-potential growth through end 2020,” Varma told media briefing in Singapore.
The Reserve Bank of India (RBI) is likely to ease again in 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”.
RBI is expected to keep its repo rate unchanged during February 2020 meeting, according to the report. fiinews.com
