The Reserve Bank of India is falling behind the curve, with growth sacrifices continuing to rise, according to Nomura.

Disagreeing with the RBI’s stance on growth, Nomura noted that while early data for October suggested a sequential rebound in activity due to festival demand, November data appeared tepid. October fiscal numbers indicated a continued contraction in public capex and slower growth in direct tax revenues, while nominal GST collections moderated to 8.5 per cent y-o-y in November.

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“Nomura India Composite Leading Index (NICLI) has been sequentially moderating through Q1 2025 (January-March) and it is currently tracking below 100, a phenomenon we have seen at the start of past cyclical slowdowns. We maintain our view that India is in the midst of a cyclical slowdown due to fading urban pent up demand, tight monetary policy, slowing nominal income growth and a negative credit impulse,” Nomura said.

“This is likely to dull the impact of a rural recovery and higher public capex. Firms are likely to remain reluctant to undertake major capex projects amid such tepid domestic demand, an uncertain global environment, higher credit costs and competition from cheaper Chinese imports,” it added.

“In our view, public capex has also reached its limit in terms of the government’s capacity to deliver, and the 3.4 per cent of GDP outlay in this year’s budget is unlikely to be fully spent. Overall, we believe growth is likely to average 6 per cent in FY25 and remain weak at 5.9 per cent,” it further stated.