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Nomura revises India’s FY15 GDP growth forecast up to 6%

Global financial services major Nomura today revised upwards India’s GDP growth forecast for this fiscal to 6 percent from 5 percent earlier amid a pick-up in private consumption, investment and export demand.

The Japanese brokerage firm has also revised the FY16 real GDP growth forecast to 6.8 percent as against 6.5 percent previously.

As per the report, the country is expected to see a 5.9 percent growth in June quarter as against its initial estimate of 4.7 percent.

The pick-up is expected to be broad-based with consumer discretionary (non-essential goods and services), exports, transportation, infrastructure and capital goods sectors surprising positively.

Also read: RBI sees FY15 GDP at 5-6%; 8% retail inflation within reach

“We expect this momentum to be sustained as sentiment has improved and the government is resolving project constraints,” the report said.

As the government “irons out” policy bottlenecks and pending investment projects materialise, other sectors should also improve, the report said.

“We expect the faster industrial recovery to have apositive spill-over impact on services sectors such as trade and transportation segments. Consequently, we are revising up our FY15 real GDP forecast to 6 percent from 5 percent earlier,” the report said. The country’s GDP growth had bottomed out at 4.5 percent in FY13.

The Japanese brokerage firm has also revised the FY16 real GDP growth forecast to 6.8 percent as against 6.5 percent previously.

“We expect the economy to fire on all cylinders in 2015-16 with a pick-up in private consumption, investment and export demand,” Nomura said in a research report.  The first leg of this investment cycle is likely to be driven by the government’s efforts on unclogging the investment pipeline and once the capacity utilisation rises and demand is sustained, the second leg of investment cycle is expected to take place.

“We see 2014 as the start of a multi-year growth cycle,” Nomura said. The risks to this optimistic outlook are more global than local. “The global growth slowdown, high oil prices and a sharp reversal in capital inflows are key downside risks,” the report added.

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