India's GDP to contract by 6.1% in FY21, estimates Nomura



Economic activity in India continues to be weak and will lead to a 6.1 per cent contraction in the gross domestic product (GDP) in this fiscal, according to Japanese brokerage Nomura, which recently said the Reserve Bank of India is likely to pause at the upcoming policy review in August and cut rates by 25 basis points each in the October and December reviews.

Nomura said the June quarter will be the ‘nadir’ from a growth perspective and the economy will contract by 15.2 per cent and the GDP will never come into the positive territory in the remaining part of this fiscal.

It estimated contractions of 5.6 per cent in the September quarter, 2.8 per cent in the December quarter and 1.4 per cent in the March quarter, which will give a full fiscal GDP at negative 6.1 per cent.

“Overall, aggregate demand continues to lag aggregate supply, especially due to weak services activity and subdued urban consumption demand,” it said in a report.

Demand has taken a larger hit from the lockdown, likely reflecting higher precautionary savings by consumers amid rising income uncertainty. In contrast, the supply side is constrained only to the extent mandated by the rules, it said.

The brokerage said the growth estimates are arrived at after analysing ‘ultra’ high frequency indicators such as various mobility indices, employment and electricity demand to glean the direction of the growth trajectory.

“We do not believe this is the end of the easing cycle, because of the mounting growth risks, and relatively unscathed medium-term view of benign inflation,” it said, adding that given the limitations on the fiscal side, the central bank will have to do heavy lifting, a news agency reported.

Fibre2Fashion News Desk (DS)

Economic activity in India continues to be weak and will lead to a 6.1 per cent contraction in the gross domestic product in this fiscal, according to Japanese brokerage Nomura, which recently said the Reserve Bank of India is likely to pause at the upcoming policy review in August and cut rates by 25 basis points each in the October and December reviews.





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