Nomura revises India's GDP forecast to 7%

In view of a surprising economic growth for the second quarter, Nomura Financial Advisory & Securities (India) today revised the country's FY10 GDP growth forecast at 7 per cent from 6 per cent earlier.

"We are revising our GDP growth forecast for FY10 to 7 per cent from 6 per cent, taking into account recent upside surprises in agriculture and industrial output and emerging signs of recovery in the services sector," Nomura said.

India's GDP grew by 7.9 per cent, as compared to 6.1 per cent in the immediate past quarter, on higher Government spending, a large contribution from net trade and pick-up in private consumption and investment.

Describing the "lower agriculture output" as the "immediate challenge", Nomura said it could be a drag on GDP in the next quarter and on rural consumption.

"But we expect urban consumption to rebound due to better job prospects," it said.

Nomura, however, believes that strong data could pave the way for the Reserve Bank to exit from the "very easy policy settings".

"We expect the policy rate hiking cycle to begin in January with a cash reserve ratio hike likely this December," it said.