According to the reports, India’s GDP growth is likely to recover to 7.8% due to higher public capex such as pay commission awards and a normal monsoon. Early this year, the economic activity has rebounded from the weakness from 2015.
“Leading indicators still suggest non-agriculture GDP growth will consolidate over the next two quarters. Still, we expect GDP growth to recover to 7.8% Y-o-Y in 2016 from 7.3% in 2015, due to higher public capex, upcoming pay commission awards and a normal monsoon,” Nomura report said.
The primary drivers of the growth are urban consumer demand, services, and government capex. There are beginning signs of an improvement in the external demand and also in infrastructure sectors. The Private investments and the industries remain weak.
The Nomura RBI Policy Signal Index is in the neutral zone. “Even as CPI inflation has moderated, higher oil prices, an improvement in global growth and a weaker rupee have together reduced the likelihood of further rate cuts in the near term and this is consistent with our expectation of no further rate cuts over the rest of 2016,” Nomura reports said.
Earlier this month, the Reserve Bank of India (RBI) reduced its policy rate by 0.25% to 6.5% its lowest level in more than five years.