Nomura Lowers India’s FY25 Growth Forecast to 6.7% Amid Slower GDP Growth

Nomura has revised its economic growth forecast for India in FY25, lowering it to 6.7% year-on-year from an earlier estimate of 6.9%. This adjustment follows the release of official data that showed India’s gross domestic product (GDP) growth for the April-June quarter was slower than anticipated.

India’s GDP rose by 6.7% during this period, falling short of the 6.9% forecast by a Reuters poll and significantly below the 7.8% growth recorded in the previous quarter. The slower growth has been attributed to a decline in government spending, particularly during the national elections, which impacted overall economic activity.

Nomura analysts, in a note dated August 30, highlighted that the weaker-than-expected GDP data could be due to both temporary factors, such as the election cycle, and more persistent factors, like slowing profit growth. However, the exact contribution of these factors to the slowdown remains uncertain.

Despite this temporary slowdown, many economists expect India’s economic growth to pick up in the coming months, driven by easing inflation and an anticipated increase in government spending. However, Nomura cautioned that while government spending may revive, challenges such as lower corporate profit growth and a moderation in credit growth could continue to act as drags on the economy.

In contrast, Goldman Sachs and J.P. Morgan have maintained their FY25 GDP growth forecast for India at 6.5%, reflecting a slightly more cautious outlook compared to Nomura’s revised estimate.

The Indian economy is at a crucial juncture, where the interplay between government policy, corporate profitability, and credit growth will determine the pace of recovery in the upcoming quarters. While there is optimism about a rebound, the lingering effects of the recent slowdown may temper the overall growth trajectory.