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Driven by steady growth and low underlying inflation, India’s macroeconomic fundamentals are expected to remain robust in the second half of FY25, according to global brokerage firm Nomura.
The firm anticipates a significant decline in the consumer price index, projecting it to drop from 5.7% at the end of FY24 to 4.8% in the first quarter of FY25.
Food Inflation Set to Moderate
Nomura credits the expected decline in food inflation to several factors, including a shift to La Nina, ample rice stocks, and increased pulse production.
These factors are anticipated to mitigate inflationary pressures in the food sector.
Focus on Capital Expenditure and Fiscal Consolidation
In a recent note, Nomura analysts highlighted the likely continuation of capital expenditure and fiscal consolidation in the upcoming Union Budget. The brokerage remains optimistic about domestic sectors such as manufacturing and investment themes over consumption.
“The government is likely to pursue fiscal consolidation and prioritise investments/capital expenditure,” stated Nomura, emphasizing the expected policy direction.
Sustained Reforms and Governance
Nomura also praised India’s resilience in implementing reforms, noting, “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.”
Encouraging Economic Indicators
According to Nomura, India’s economic fundamentals remain strong, with positive growth prospects, favorable inflation dynamics, a stable current account status, and encouraging fiscal progress.
Nomura’s report underscores India’s strong economic outlook for FY25, driven by low inflation and solid growth. The brokerage firm highlights the importance of fiscal consolidation and capital expenditure while praising the country’s continued commitment to reforms.
