Economy at early stages of recovery, GDP to rise to 8%: Nomura

The Indian economy is at initial stages of recovery, global brokerage firm Nomura has said. But it stuck its neck out, saying the GDP growth is expected to rise to 8% this fiscal as against 7.3% in 2014-15.

According to Central Statistics Office (CSO) data released yesterday, the Indian economy grew at 7.3% in 2014-15, up from 6.9% a year ago, mainly due to improvement in the manufacturing sector.

Talking about the GDP numbers, the Japanese brokerage house said one can paint both a bearish or bullish picture, but it's in the "glass half-full camp".

"Despite the scepticism, we are optimistic and continue to believe that the Indian economy is at the initial stages of a business cycle recovery," Nomura said in a research note, adding that lower inflation, easier financial conditions, policy efforts and rising profit margins are expected to back up a cyclical recovery.

Pegging the GDP growth at 8% this fiscal, Nomura said key risks to this assumption are a bad monsoon and weak global demand.

On policy rates, the report said: "We expect RBI to cut the repo rate by 25 basis points to 7.25% on June 2, in line with the consensus, followed by a pause until end-2016."

The central bank has lowered its policy rate twice so far outside the cycle in 2015, but kept it unchanged at its last review on April 7 due to fears of unseasonal rains impacting food prices.