Nomura reports India’s optimism ‘misplaced’, projected FY24 growth 5.2%

Stating that Indian policymakers are ‘misplaced’ about their optimism on the country's growth prospects, a sharp moderation in India's growth rate to 5.2% has been projected by Japanese brokerage Nomura for fiscal 2023-24 compared to FY23. Its FY23 gross domestic product growth estimate is 7%—at par with the Reserve Bank of India’s revised down forecast.

Nomura economists recently met Indian policymakers, corporate representatives, commercial banks and political experts across a week.

"While we broadly agree with our interlocutors on the growth prospects in FY23, we believe the optimism in FY24 may be misplaced and that the spillover effects from the global slowdown are being underestimated," its economists Sonal Verma and Aurodeep Nandi said in a note.

The mood in the country is ‘relatively positive’ with risks seen emanating from weaker global demand, the brokerage was quoted as saying by a news agency.

Domestic recovery is getting broad-based as seen through pick-up in investments and higher credit growth, it said.

The brokerage, which expects the RBI to go for a 35 basis points hike at the December meeting and deliver a 25 basis points increase in February to take the repo rate to 6.50%, recommended policy vigilance amid global headwinds and underlined that macro stability should be the priority over growth.

It expects inflation to average at 6.8% in FY23, slightly above the RBI's 6.7% estimate, and cool down to 5.3% in FY24.