Nomura cuts India's FY20 GDP growth forecast to 4.9%

New Delhi: Nomura on Friday cut India's GDP growth forecast by 110 basis points to 4.9% for 2019-20 (Apr-Mar) because growth recovery is expected to be delayed and remain sub-par as it sees the economy dealing with a "triple" balance sheet problem amid weak global demand.

Though Nomura sees India's GDP growth recovering to 6.1% in 2020-21, the forecast is lower than 6.9% projected earlier.

"In the thick of resolving the twin balance sheet problem of banks and corporates, the economy is now additionally burdened with a 'triple balance sheet problem', involving shadow banks," said Nomura Chief India Economist Sonal Varma in a report today.

Should the GDP growth fall to 4.9% in 2019-20, it would be the lowest since 2008-09 when it slumped to 3.1% in the aftermath of the global financial crisis.

"...while there are tailwinds in the form of counter-cyclical macro policies, base effects and the government's continued commitment to structural reforms, the triple balance sheet problem has tightened credit conditions, hindered policy transmission, prolonged the balance sheet deleveraging process and constrained investment," Varma said.

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