Nomura Predicts Robust Macro Fundamentals For India In Second Half Of FY25

In their analysis, Nomura analysts further projected ongoing emphasis on capital expenditure and fiscal consolidation in the forthcoming Union budget

India's macroeconomic fundamentals are projected to stay robust in the latter half of FY25, buoyed by consistent growth and subdued underlying inflation, according to global brokerage firm Nomura. The firm forecasts a decrease in India's consumer price index, expecting it to drop from 5.7 per cent at the conclusion of FY24 to 4.8 per cent in the initial quarter of the current fiscal year (FY25). 

The brokerage firm highlighted India's low underlying inflation as noteworthy in the global landscape, where inflation tends to be persistent. In addition, it predicts that food inflation will ease as a result of the transition to La Nina, abundant rice reserves, and higher pulse production.

In their analysis, Nomura analysts further projected ongoing emphasis on capital expenditure and fiscal consolidation in the forthcoming Union budget. The brokerage firm holds a positive outlook on domestic sectors, particularly focusing on manufacturing and investment themes rather than consumption. 

Nomura previously commented that the Union Budget is expected to underscore the continuity in policy direction, which they anticipate will remain largely unchanged. “The government is likely to pursue fiscal consolidation and prioritise investments/capital expenditure," said the brokerage firm.

Nomura suggests that reforms in India have navigated political challenges successfully. “We expect the government to continue the pace of governance and administrative reforms, leaving states to work around the more intractable reforms around land and labour,” it said.

Nomura additionally emphasises that the Reserve Bank of India’s (RBI) considerable foreign exchange reserves are poised to buffer against external shocks, fostering stability and bolstering capital inflows. The firm anticipates that this enhanced stability will lead to a reduction in India’s risk premium overall.

Reports indicate that India's economic fundamentals continue to exhibit strength, with encouraging prospects noted in growth dynamics, inflation trends, current account status, and fiscal advancements.