India's GDP growth forecast to decelerate to 5.3% in FY24: Nomura

11 Apr '23

2 min read

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Reserve Bank of India's (RBI) GDP growth estimate for financial year 2024 is too optimistic, predicting that growth will slow down to 5.3 per cent, as per Nomura.
Weak global growth, high uncertainty, and the lagged effects of domestic policy tightening are the factors that could lead to a downside of over 1 percentage point to the RBI's growth estimate.

India’s GDP growth is forecast to slow down to 5.3 per cent, indicating a downward trend in the economy, according to Japanese brokerage firm Nomura. Reserve Bank of India's (RBI) GDP growth estimate of 6.5 per cent for India in financial year 2024 (FY24) is too optimistic, as per the brokerage firm.

While several agencies have already cut their growth forecasts for FY24, Nomura stated that RBI will pivot to rate cuts from October due to high uncertainty, weak global growth, and the lagged effects of domestic policy tightening, according to Indian media reports.

A downside of over 1 percentage point to the RBI's growth estimate is expected. The brokerage also agreed with the RBI's estimation of price rise, saying that the worst of headline inflation has passed.

"However, the revised GDP growth forecast of 6.5 per cent in FY24 appears too optimistic,” the reports said quoting Nomura.

The RBI had attributed the upward revision in growth to a dip in crude oil prices from $90 per barrel to $85 per barrel. However, RBI’s governor, Shaktikanta Das, clarified that the policy call is a pause on rates and not a pivot, but RBI will not hesitate to act if it sees any risks.

The RBI is likely to pause again in June to assess the impact of its past rate hikes, where it has raised rates by 2.50 per cent over the last 11 months. Furthermore, the risks to its estimate of a rate cut in October are skewed towards an action earlier than expected, according to the brokerage.

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