India's growth recovery uneven; downside risks persists: Nomura

India’s growth recovery continues to be uneven and last year’s positive growth momentum has slowed down considerably, says a report. According to Japanese financial services firm Nomura, the country’s growth momentum is showing signs of tapering off this year and the economic recovery is likely to slow in the second and third quarters.

“In our view, tighter financial conditions and weak global demand are hurting the industrial (and investment) sector. This suggests some downside risks to our GDP growth forecast of 7.8 per cent y-o-y in 2016, versus 7.3 per cent in 2015,” Nomura said in a research note.

The government recently lowered its economic growth forecast for 2015-16 to 7-7.5 per cent from 8.1-8.5 per cent.

The global brokerage firm said India’s growth momentum, has slowed considerably in 2016 and leading indicators suggest some moderation in non-agricultural GDP growth this year.

“Overall, Nomura’s proprietary indices for India, together with high frequency data, indicate that the growth recovery continues to be uneven with a growing wedge between the consumer and the industrial sectors,” it said.

Urban consumption has continued to perform better owing to low inflation and low oil prices, while rural consumption (rural wages, 2-wheeler sales) remains weak, it said.

However, passenger car sales growth has also moderated in early 2016, and this may suggest initial signs of weakness in urban consumption, it added.

On RBI’s monetary policy stance, the report said there is room for another 25bp rate cut exists.

“We expect the RBI to deliver a final 25 bps rate cut at its April 5 policy meeting,” it said.

RBI Governor Raghuram Rajan on February 2, left the key interest rate unchanged citing inflation risks and growth concerns.