India's GDP to contract 6.1% in April-June: Nomura

MUMBAI: The Indian economy will contract 6.1 percent in the April-June quarter and is likely to expand only in the December quarter, a Japanese brokerage, which expects the RBI to reduce by 0.75, said on Monday. percent rates to drive growth. 2020.

The conventional approach to rate setting, which involves a strong focus on inflation, will take a back seat and growth concerns will be resolved, Nomura said in a report after the minutes (MPC) were made public.

The economy will grow 3.2 percent in the January-March period and will contract 6.1 percent (June quarter) and 0.5 percent in the September quarter, before growing 1.4 percent in the last quarter of the calendar year, he said.

It should be noted that the COVID-19 crisis has resulted in a three-week shutdown of India, which may also be extended further to halt the spread of infections. The likely economic impact had caused the RBI to move forward at its bi-monthly policy review meeting for a week and cut rates by 0.75 percent and cut liquidity in late March.

We believe that the 'conventional' flexible inflation targeting framework will be in the background at upcoming policy meetings and members will be eager to analyze short-term inflationary pressures, as rescuing growth and maintaining financial stability will emerge as a priority. overwhelming. He said.

More unconventional policy measures are expected to follow, he said, adding that the RBI will cut its key rates by an additional 0.75 percent through December.

At their next meeting in June, MPC members will face the deteriorating impact of the shutdown, he said, adding that food prices have soared in April and that inflationary pressures may not decrease immediately.

There will be a rate cut of at least 0.25 percent in June and the MPC may choose to advance further policy easing in light of growth risks, he said.

Unconventional policies accompanying the rate cut will include a commitment to aggressive open market operations, more liquidity injections through long-term repo operations and more tolerance measures, he said.

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