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Cash shortage may slowdown GDP to 6.5% in Oct-Dec qtr: Nomura

Press Trust of India  |  Mumbai 

crunch post is expected to slowdown India's growth to 6.5 per cent for the fourth quarter of 2016 and is likely to spill over into the first quarter of 2017, says a report.

According to global financial services firm Nomura, the shortage is likely to last till January.


Nomura noted that even though the economy experienced a robust aggregate momentum before the demonetisation, its recovery was narrow-based due to weak investments and slow non-agriculture sectors with consumption serving as the only growth engine.

"We expect the shortage triggered by to last until January and growth to slow to 6.5 per cent in fourth quarter (October-December) and to remain subdued at 7 per cent in the first quarter 2017," Nomura said.

"However, once the shortage eases, we expect a gradual recovery to take hold in the second half of 2017, owing to a boost to fiscal finances and improved system liquidity," it added.

As per the report, cash-dependent sectors (agriculture, trade, real estate, construction and transport) and conspicuous consumption demand (high-end white goods, high-end cars, gold and jewellery and travel) would likely to be "particularly hit" by

Nomura also said that in the light of the near-term growth slowdown, it is expecting the Reserve (RBI) to deliver a 25 basis point repo rate cut to 6 per cent in its policy review next week.

India's growth accelerated to 7.3 per cent for three month-ended September 2016, better than 7.1 per cent in the previous quarter but marginally below expectations.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Thu, December 01 2016. 17:32 IST
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