Economic activity continues to remain weak and will lead to a 6.1 per cent contraction in India’s GDP in the current fiscal, a foreign brokerage said on Tuesday. The Reserve Bank is likely to pause at the upcoming policy review in August and cut rates by 25 basis points each in the October and December reviews, Japanese brokerage Nomura said in a report.
All the analysts expect a contraction in the GDP due to the COVID-19 pandemic, which has impacted both supply and demand forces in the economy since March. Official data also suggests a surge in inflation, which will further drag down the GDP in real terms.
Nomura said the June quarter will be the ‘nadir’ from a growth perspective and the economy will contract by 15.2 per cent and the GDP will never come into the positive territory in the remaining part of this fiscal. It estimated contractions of 5.6 per cent in September quarter, 2.8 per cent for December quarter and 1.4 per cent in the March quarter, which will give a full fiscal GDP at negative 6.1 per cent.
Overall, aggregate demand continues to lag aggregate supply, especially due to weak services activity and subdued urban consumption demand, it said. — PTI