Nomura expects India GDP growth to bottom out at 4.5% to 5% and expects GDP growth to pick up post elections
India’s gross domestic product (GDP) should pick up further to around 5% during the fourth quarter to end-March on on a continued push from the bumper summer crop and strong exports, says Nomura, in a research report.
“However,” it said, “we expect growth to moderate again in first half of 2014 to around 4.5% by Q2 2014, on account of the anticipated sharp cutback in government spending in Q1 2014 and delay in capex activity due to political uncertainty.”
Nomura also expects the Indian government cutbacks to happen prior to the Indian elections and are cautious about their forecast due to political uncertainty.
India GDP grew 4.8% in the third quarter of the 2013 calendar year, which was above consensus expectations of 4.6% (Nomura expected it to be 4.7%), on account of good agricultural product and improvement in power, financial services and infrastructure sectors. However, much of the GDP growth improvement was driven by export growth (thanks to a weak rupee) and cutback in government spending.
“On the demand side, better net exports and marginal improvement in private consumption and investment offset lower government spending. GDP at market price rose 5.6% y-o-y in Q3 of which net exports contributed four percentage points (70% of the overall growth),” the note said.
Nomura believes that India’s GDP growth is bottoming out this quarter at 5%, and expects export growth to pick up after the Indian elections, once a government has been formed. “GDP growth is still bottoming out in the 4.5-5.0% range and we expect a more sustained growth uptick after Q3 2014 once political stability has been established and aided also by steady export growth. We expect GDP growth to average 4.7% y-o-y in FY14 (year-ending March 2014), down from 5.0% in FY13, before it picks up again to 5.0% in FY15,” Nomura concluded.
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