Nomura: June GDP to print in at 5.7% on demand slump,NBFC mess

MUMBAI, July 30:Despite the policymakers’ efforts
to revive the sagging growth momentum, the economy is set to
print in a 5.7 percent uptick in the June quarter and is
likely to bottom out from there, a brokerage has said.

India presents a picture of “short-term despair and
medium term hope”, Japanese brokerage Nomura said in a note.

The slowdown will be led by consumption and services,
it said, attributing the same to the ongoing crisis among the
shadow banks which have been funding the consumption drive
before liquidity crisis hit them hard since last September,
coupled with the weakening global growth and the resultant
demand slump.

The brokerage, however, said the industry and
investment indicators are relatively stable.

“We believe GDP is yet to bottom, and expect it to
further moderate to 5.7 percent in the June quarter, further
down from 5.8 percent in March quarter,” the note said.

Growth momentum is likely to pick up in the September
quarter to 6.4 percent, which will go further to 6.7 percent
in the three months after that, Nomura said, citing the data
from its proprietary tools.

“We will watch coming dataprints to see whether they
confirm or negate the sustainability of the turnaround in the
growth cycle,” it said.

It can be noted that the economy lost the verve and
slipped to five-year low of 5.8 percent in the March quarter,
thereby pulling down the overall GDP growth to a mutli-year
low of 6.8 percent, even as policymakers have been setting
ambitious targets like making the country a USD 5-trillion
economy by 2025 which will entail an annual growth of 8
percent during these years.

Addressing the concerns on the growth front, the
Reserve Bank has cut its key rates thrice by a cumulative 0.75
percent to a nine-year low of 5.75 percent between February
and June and is set to slash again next week seizing on the
opportunity provided by a cooling inflation.

However, banks are yet to pass on the entire quantum
of these cuts to their borrowers due to a time taken in
transmission. SBI’s move to cut deposit rates sharply
announced Monday, may fasten the transmission finally. (PTI)