GDP growth likely to slip to 6.7% in the March quarter: Nomura

The Dollar Business Bureau 

India's GDP growth is likely to slip to 6.7% in the January-March quarter from 7%, but could gradually recover to 7.7% in 2018, predicted the Japanese financial services major Nomura. 

The gradual recovery to 7.7% could happen due to higher consumption- as a result of state pay hikes, lower lending rates and remonetisation and public spending, the report stated. "In our view, the recovery in industrial production should gather momentum through 2017 supported by ongoing remonetisation, release of pent-up consumption demand, lower lending rates, higher public capex and impending pay hikes for state government employees." 

Making a mention of the after-effects of demonetisation, Nomura said that the soft industrial activity that was seen in February was due to the impact of demonetisation which it declared was a 'transitory' one. 

India's industrial output slipped to a 4 month low contracting by 1.2% in February. 

Referring to RBI's monetary policy stance it said, "given its view of a growth recovery along with a pick-up in inflation in the second half of this year, the RBI is likely to stay on hold throughout 2017 with risks skewed towards a hike in early 2018". This is a result of RBI keeping the repo rate unchanged at 6.25% but increasing the reverse repo rate at 6% from 5.75%. 

The Marginal Standing Facility (RBI's overnight lending rate for banks against government securities) has been revised downwards by .25% to 6.5%.