Nomura Flags Risks: Indian Economy Faces Cyclical Slowdown

Japanese brokerage firm Nomura warns that the Indian economy is undergoing a cyclical growth slowdown, with GDP growth forecasts likely being overly optimistic. Indicators such as urban consumption and salary outlays point to continued weakness, while monetary policy remains tight and credit growth slows.

Japanese brokerage firm Nomura has identified signs of a cyclical growth slowdown in the Indian economy, marking a deviation from the Reserve Bank's optimistic GDP projection of 7.2 percent for the fiscal year 2025.

Nomura's analysis highlights several indicators showing a moderating GDP growth trajectory, with risks rising for their own estimates of 6.7 percent for FY25 and 6.8 percent for FY26. They note a decline in urban consumer indicators, including a slump in passenger vehicle sales and flagging FMCG demand.

Adding to the downturn, companies have scaled down salary outlays, with salary expenditure declining by 0.8 percent after inflation adjustments. The brokerage attributes this to weaker nominal salary growth and a tightened workforce. Meanwhile, tight monetary policy and a crackdown on unsecured credit lend to the slowdown.

(With inputs from agencies.)