GDP growth may moderate to 7.2% in 2nd half of 2018

Tighter financial conditions will constrain the growth, says Nomura report.

New Delhi: The Indian economy is likely to have witnessed solid economic growth in the April-June quarter but leading indicators suggest a slowdown in the coming months, says a Nomura report.

According to the global financial services major, India’s economic recovery has peaked and growth rates are likely to get constrained in the second half of this year. “Our proprietary indicators suggest the inflection point for the cyclical recovery may just be around the corner,” Nomura said in a research note.

India’s gross domestic product (GDP) grew at fastest pace in seven quarters at 7.7% in January-March quarter on robust performance by manufacturing and service sectors and farm output.

“For now, strong core momentum, sticky global oil prices and higher minimum support prices suggest conditions are ripe for another 25 bp rate hike in August,” the agency said.

Reasons for slow growth

  • The report said tighter financial conditions, slowing global growth and adverse terms of trade will start to constrain growth in second half of 2018.
  • Nomura expects GDP growth to peak in April-June quarter and then moderate to 7.2% in the second half of 2018 from around 7.8% in first half.
  • On Reserve Bank of India’s monetary policy stance, the report said the current macroeconomic conditions merit a 25 bps rate hike in the forthcoming policy meeting on August 1.
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