NOMURA Ups India’s 2022 GDP Forecast to 7.7% Sees Inflation At 5.3%…

Deapite the second wave of Covid infections that brought the economic activity in most cities to a standstill in the past few months, Nomura has raised India’s gross domestic product (GDP) forecast for 2022 by 0.7 percentage points (pp) to 7.7 per cent. That apart, the research and brokerage house has rejigged the forecasts for consumer price inflation (CPI) and current account deficit.
“We raise our 2021 and 2022 current account (CA) deficit forecasts to 1.5 per cent and 1.3 per cent of GDP, respectively (from 1.1 per cent and 0.8 per cent), and CPI inflation to 5 per cent and 5.3 per cent (from 4.9 per cent in both years). We also pencil-in an additional 25bp repo rate hike in Q3 2022,” wrote Sonal Varma, managing director and chief India economist at Nomura, in a recent co-authored note with Aurodeep Nandi.
The first flush of growth indicators for May, according to Nomura, suggest a significant hit to consumption and services, with the manufacturing and export sectors being more resilient. The overall impact, Varma and Nandi said, is turning out to be less than during the first wave. Downside risks, however, include a third wave, a slower pace of vaccination, capital outflows and higher commodity prices. Upside risks include a faster pace of vaccination.

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