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Nomura’s Varma expects GDP growing 9.2 percent in the year-ending March.
Naive optimism full#
Growth remains well on track for a full year growth of around 9.5 percent,” said Rakshit.
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“Growth should remain fairly well supported in third quarter too on account of festive season and opening up of services sector. On the GDP front, analysts for now do expect growth to be in-line with earlier expectations. Overall Nomura expects a cumulative 75 bps hike in repo and reverse repo rates in 2022.
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Nomura’s Varma still expects the RBI MPC to raise reverse repo rate by 40 basis points in December, although there are now risks of some of it getting pushed to the February meeting. He still expects the RBI to raise the reverse repo rate (rate at which a central bank borrows short-term money from banks) in February, with the December meeting “remaining a close call.” Suvodeep Rakshit, senior economist at Kotak Institutional Equities feels that with the new COVID variant starting to spread globally and its impact on the economy uncertain, RBI would possibly wait for more clarity before decisively moving on interest rates. The monetary policy committee of the Reserve Bank of India will be closely watching these growth parameters as it prepares for its next meeting in the coming week.
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Further, exogenous demand drivers in the form of exports and sustained government capex will need to create a growth bridge till private investment and consumption recover optimally,” said Arora. However, we reckon that the nascent recovery ahead have traces of scarring and segmented labor market. “The emerging uncertainties from Omicron (COVID variant) and consequent supply bottlenecks could be countered by healthy consumer demand and high household savings, continued government spending, and considerable wealth effects. “Looking ahead, the outlook is more mixed, with improving mobility, but supply-side bottlenecks bogging down production, alongside signs of weakness in demand for mass consumption goods,” said Sonal Varma, managing director and chief economist for India and Asia ex-Japan at Nomura Securities.įactors such as better adapted firms, policy response, stable financial conditions, global growth spill-overs, and improved vaccine drive have created growth buffers back home, said Madhavi Arora, lead economist at Emkay Global Financial Services. Furthermore, emergence of a new COVID-19 strain is a cause for worry for sectors like travel, tourism and retail. Supply-side issuess in areas like semiconductors continue to hurt production of automobiles and consumer durables.
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While growth in contact intensive sectors like trade, hotels, transport, storage and communication at 8.4 percent was also “impressive,” growth in manufacturing sector at 5.5 percent was a “bit disappointing,” said Rao, who was a member of the 14th finance commission.Īs we look forward, uncertainties remain. Public administration, defence and other services recorded a growth of 17.4 percent in September, compared with the contraction of 9.2 percent in the second quarter last year. The growth was driven by a sharp increase in public expenditure in the second quarter of the current financial year, after conservative spending in the June quarter, according to M Govinda Rao, chief economic adviser at Brickwork Ratings. In absolute terms, India’s second quarter GDP at Rs 35.7 trillion is higher than in the second quarter of 2019-20, a pre-COVID year, note analysts. While this was slower than the 20.1 percent GDP growth recorded in the June quarter due to base effects, it was still faster than the 7.4 percent contraction in the year ago quarter. While most analysts expect the pickup to continue in the coming quarters, ongoing supply-side bottlenecks and emergence of new coronavirus variants do pose a risk, they add.ĭata released by the National Statistical Office on Tuesday showed the economy grew at 8.4 percent in the July-September quarter. However, it seems to have recovered at a fast clip from the record 24.4 percent contraction in the April-June quarter of 2020-21 fiscal as infections have fallen, vaccination rate has improved and demand across sectors has picked up. India’s economy took a huge hit last year as the government imposed strict lockdowns to curb the rapid spread of COVID-19.