Nomura Financial Advisory and Securities has slashed India's growth forecast citing macro economic concerns. The brokerage house has downgraded its numbers for FY20 to 4.9 percent from 6 percent and for FY21 it has downgraded the outlook to 6.1 percent from about 6.9 percent..

We have made a reduction to both FY20 and FY21. Specifically on the trajectory vis-à-vis our earlier assumption that the Q1 of FY20 will be the trough at 5 percent. Clearly, the high frequency indicators suggest otherwise. So we are now expecting growth to moderate from 5 percent to 4.2 percent in Q2 with only a marginal pick up to 4.7 in Q3 and slightly above 5 in the final quarter. We are expecting a deeper trough and also a sub-par recovery,” Sonal Varma, MD and chief India economist at Nomura Financial Advisory and Securities – India, told CNBC-TV18..

“The September, October and the November periods are going to throw up very volatile numbers because the Diwali festival season has moved from November to October. So September numbers will be relatively better, October numbers will be very bad. So we will have to look at an average of a few months,” she added.

“Ahead of Diwali, a lot of auto companies did give heavy discounts as a result of which car sales picked up. Whether that is durable or not, one doesn’t know. So if we have seen an underlying improvement – we have seen some improvement in the month of September. There are two positives, one is that the government has cut corporate taxes, the Reserve Bank of India has cut interest rates, which should be a positive and third base effects are positive,” Varma pointed out.

“What concerns us is that beyond the near-term high frequency indicators – what does the next 12 months hold, will the growth pick up to the extent that street is expecting -- and our view is that there will be further growth disappointment owing to some key reasons. One – we have moved from a situation of a twin balance sheet problem to a triple balance sheet problem. Second – transmission is a problem, interest rates are not getting passed through. Third – the global outlook continues to be quite weak. We do think that there is further downside to the growth outlook,” she added.

According to the economist, though in July, August and September, there has been a big pick up in government spending, the private sector demand is extremely weak and the October numbers, though we need to take into account an average of September, October, November because of the Diwali festival, even adjusting for that the underlying numbers still seems to be extremely weak, which suggests that private demand is on the decline.

First Published:Nov 11, 2019 4:03 PM IST