Global brokerage company Nomura has cut India's GDP forecast to 12.6 per cent from 13.5 per cent forecast earlier as the country faces a consistent rise in coronavirus cases and higher inflation. Nomura has pegged the calendar year GDP growth at 11.5 per cent, a decline from 12.4 per cent estimated earlier.
In its latest report, 'India: Standing tall amid second wave', Nomura has said the revision in GDP forecast reflected the impact the Covid-19 wave could have on the economy. In its report released earlier this month, Nomura had said India's GDP growth could fall to 12.2 per cent if Covid-19 cases continue to rise.
"Daily new Covid cases under the second wave have now exceeded the first wave peak, and more states have joined the worst-affected state of Maharashtra in entering quasi lockdown," the report said.
As per Nomura, lockdowns in badly-hit states seem benign as only a few contact-intensive sectors could be hit because of them, while most Indian businesses have adopted the new normal. The report by economists Sonal Varma and Aurodeep Nandi says the overall impact of the second wave on the economy could be visible in Q2 but broader upcycle will remain intact.
"We expect the second wave to result in weaker sequential momentum in Q2 (Q1FY22), owing to the lockdowns, but the broader growth upcycle to remain intact due to ongoing vaccinations, the lagged impact of easy financial conditions, front loaded fiscal activism and strong global growth," it said.
Nomura said India could clock around 32.5 per cent GDP growth in the first quarter of FY22, which is down from 34.5 per cent growth expected earlier, primarily due to low base (24.4 per cent degrowth in Q1FY21) last year.
Nomura had recently said the second Covid-19 wave is likely to get worse in terms of the number of infections, and as such, more restrictions are likely, which will hurt the sequential momentum of growth in Q2 CY21. It agreed with the RBI's assessment in the MPC policy statement that less stringent lockdowns, an adaptation to the new normal, ongoing vaccinations, stronger global growth and lagged effects of easy financial conditions are likely to support the cyclical growth recovery.