RBI’s GDP growth estimate of 7.2% ‘overly optimistic’, India in recession: Nomura
Japanese brokerage Nomura on Monday said the Indian economy has entered a phase of “slow cyclical growth” and the Reserve Bank’s GDP growth estimate of 7.2 percent is “very optimistic”.
The brokerage said it sees “upward risks” to GDP growth estimates of 6.7 percent in the ongoing FY25 and 6.8 percent in FY26.
“We believe that the Indian economy has entered a cyclical growth slump. Consistent and leading growth indicators point to further moderation in GDP growth and the RBI’s forecast of 7.2 percent for FY25 is overly optimistic,” the trader said in a note.
The RBI maintained its growth estimate for FY25 at 7.2 percent earlier this month, as some observers have been coming out with lower numbers.
Nomura said urban consumption indicators have been softening recently, and pointed to declining passenger car sales, passenger car valuations and FMCG companies pointing to weak urban demand.
“We believe that this weakness in urban demand is likely to continue,” the brokerage said.
Explaining that companies are reducing their wage costs, the brokerage said that real wages and salaries of listed companies fell by 0.8 percent in the September quarter when adjusted for inflation if the numbers are to go by so far.
The same was 1.2 percent in the June quarter, 2.5 percent in FY24 and 10.8 percent in FY23, the brokerage said, adding that this may reflect a combination of weak wage growth and a weak workforce.
“The post-pandemic surge in demand has faded, monetary policy is tight and the RBI’s major unwinding of unsecured, bubble debt is reflected in a decline in personal credit and growth in non-banking corporate lending,” the brokerage said. said.
