Tight credit and external uncertainty to weigh on India’s growth: Sonal Varma
«And of course, we have seen profitability in some of the big manufacturing companies come down, which is also going to weigh on growth, so on the whole domestic demand contribution to growth we think will be softer than expected,» says Sonal Varma, Nomura.
This 6.5% figure for Q2 GDP, is it closer to your expectation as well?
Sonal Varma: We think it will be closer to the lower end of that range. So, we are expecting Q2 at 6.3%. So, slightly below consensus expectations of 6.5% and also below RBI’s forecast of 7%. I mean, in particular, in our view, we are likely to see a bigger drop in private consumption. Even fixed investment where we saw government spending pick up, our view is the private side of investment, things like construction activity indicators have been quite soft. And of course, we have seen profitability in some of the big manufacturing companies come down, which is also going to weigh on growth, so on the whole domestic demand contribution to growth we think will be softer than expected.
What does it mean to your overall estimates for the entire year? Is that at risk as well?
Sonal Varma: Yes, we think so. So, our full year estimate is 6.7% for FY25. First half is already tracking much lower. I think the big question is to what extent first half is sort of a transient slowdown and things will revive. Now, there are certainly things that look better in the second half.
Government spending should pick up compared to first half, particularly on the capital expenditure side, and better crop
