Nomura cuts India GDP growth forecast to 5.8% in FY13
MDT/PTI 26 June 2012

According to Nomura, Indian government's policies remain inflationary, reducing the scope for rate cuts, hurting growth and in turn exacerbating the fiscal deficit

 

New Delhi: Noting that India's monetary and fiscal policies are at loggerheads, financial services company Nomura has lowered the country's growth forecast for this fiscal to 5.8% from 6.7% earlier, reports PTI.

"Given weaker initial conditions and limited scope for a major stimulus, we revise down our GDP growth forecast to 5.8% for FY13 (year ending March 2013) from 6.7%," it said in a report.

Nomura has also cut its India GDP forecast for 2013-14 to 6.6% form the earlier 6.9%.

The government is aiming at GDP growth rate of about 7.6% this fiscal. India's economic growth rate slowed to 6.5% in 2011-12 from 8.4% in the previous two fiscals.

The financial services company said India's monetary and fiscal policies are at loggerheads and in deadlock.

It further said India government policies remain inflationary, reducing the scope for rate cuts, hurting growth and in turn exacerbating the fiscal deficit.

"In our view, the longer the economy stays in the current deadlock, the bigger the policy shock that will be required to get out," Nomura added.

On wholesale price based inflation, Nomura said that it has revised upward its average forecast to 7.6% for the current fiscal from earlier 7.1% due to higher food prices and rupee depreciation.

It has also revised upward its fiscal deficit forecast for India to 5.8% of GDP in the current fiscal from 5.2%. Government aims to bring down the fiscal deficit to 5.1% in 2012-13 from 5.76% in the previous fiscal.

Nomura's observations comes against the backdrop of global agency Moody's retained its stable rating outlook for India.

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