India: Consumption to propel growth: Nomura – 28 Jun 2017

  • India’s GDP growth witnessed a trough in 1Q17, but going forward the economy is expected to see gradual improvement in growth numbers primarily driven by consumption, says a Nomura report.
  • According to the Japanese financial services major, consumption has recovered from the demonetisation “shock” and while external demand has moderated slightly, it remains supportive of growth. Moreover, there are signs of a pick-up in central government investment.
  • The report said some GST-related disruptions could spill into early part of 3Q17. But good monsoons, strong rural wage growth, pay hikes for state government employees, lower lending rates and a modest pick-up in external demand may push GDP growth to 7.1% in 3Q17 and further to 7.7% in 4Q17
  • On the monetary policy front, Nomura’s policy signal index hints a rate cut. Earlier in Jun 17, the RBI left the key repo rate unchanged at 6.25% as it wanted to be surer that inflation will stay subdued.

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