According to Nomura, excluding agriculture, India’s GDP growth is expected to moderate to 4.9% in FY14 from 5.0% in FY13 due to continued slack in mining output, contraction in manufacturing output growth and subdued activity in the construction and trade, hotel, transport and communication sectors
India’s gross domestic product (GDP) growth, excluding agriculture, is expected to moderate to 4.9% in FY14 from 5.0% in FY13, suggesting weaker underlying demand momentum, says Nomura.
In a research report, Nomura said, “This moderation will be due to continued slack in mining output, contraction in manufacturing output growth and subdued activity in the construction and trade, hotel, transport & communication sectors. The only silver lining is the pickup in financial services growth (11.2% y-o-y), but this appears to be largely one-off (reflecting stronger deposit growth due to NRI inflows under the forex swap window).”
Nomura estimates India’s real GDP growth at 4.9% in FY14 (year ending March 2014), better than 4.5% in FY13. Much of the rise is due to stronger agriculture growth, says Nomura in a research note on GDP growth, it said.
According to Nomura, domestic demand - both investment and private consumption – are likely to moderate further while net exports are expected to improve and contribute more than 50% to overall GDP growth in FY14.
For two years in running now, the economy will have expanded at less than 5%, estimates Nomura; the question is whether FY15 will see a breakout. Nomura analysts do not see a breakout; rather they expect a prolonged period of consolidation continuing for most of 2014.
External demand is relatively better, but with both monetary and fiscal policy tightening, Nomura expects GDP growth to remain around 5% y-o-y in FY15. A stable government post elections can, overtime, revive the investment cycle if reforms are reinvigorated.
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