India: Turning point in the growth rate - Nomura

According to analysts at Nomura, India’s concurrent growth indicators paint a solid, domestic demand-led growth outlook for Q2.

Key Quotes

“Our monthly activity indicator has risen to a seven-year high and, in line with this, we expect GDP growth to rise to 7.8% y-o-y in Q2 from 7.7% in Q1.”

“However, leading indicators point to a possible turning point in the growth rate in Q3; Nomura’s composite leading indicator moderated in Q3, consistent with our view that growth is set to slow cyclically due to tighter financial conditions, high oil prices, slowing global growth and a pullback in investment spending ahead of elections.”

“Nomura’s RBI Policy Signal Index has come off from rate hike territory, returning to the neutral zone due to lower inflation. We expect the RBI to leave policy rates unchanged in October (and beyond), given our view of a lower growth-inflation path ahead.”

“Finally, Nomura’s Economic Surprise Index for India has reached the upper-bound of the +/-1sd window. Given its mean-reverting property, we believe negative data surprises are now more likely in coming months.”