GDP to fall to 5.3% next year: Nomura

According to Nomura Financial Advisory and Securities (India) Pvt Ltd, India’s GDP growth in 2009-10 is forecast to be at a low of 5.3 pc, with the first quarter ending June 30, 2009 expected to hit a trough of 4.5 pc.

India’s growth momentum has hit a hurdle after growing at an average of 9.3 per cent over the past three years. The GDP growth in 2009-10 is forecast to be at a low of 5.3 per cent, with the first quarter ending June 30, 2009 expected to hit a trough of 4.5 per cent, according to Nomura Financial Advisory and Securities (India) Pte Ltd, a unit of Japan’s Nomura Securities.

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It has also lowered the 2008-09 GDP growth forecast to 6.8 per cent from 7.2 per cent, while slashing 2009-10 forecast to 5.3 per cent from 6.9 per cent.

The main reasons for the lowering of the growth forecast are slumps in exports and capital expenditure and their expected effects, said Sonal Varma, economist with Nomura India.

“Our forecasts assume major policy responses. By the end of 2009, we pencil in a 250 basis points cut in the CRR (cash reserve ratio) to 3.0 per cent, a 250 basis points cut in the repo rate (the rate at which the Reserve Bank of India lends short-term funds to banks) to 5.0 per cent and a 200 basis points cut in the reverse repo rate (the rate at which banks deposit excess surplus with RBI) to 4.0 per cent,” Varma said.