Nomura’s Forecast: Interest Rates May Decrease By 75bps In The Second Half Of 2023, GDP Growth Expected To Come Down to 4.5%

Nomura's Forecast

Nomura’s Forecast – Nomura Forecast for India: Policy interest rates in India may be increased by another 25 basis points next month, but after that the process of rate hike will stop. Not only this, due to the fall in the GDP growth rate in the second half of 2023, the Reserve Bank of India (RBI) may also have to cut the interest rate. Japan’s agency Nomura Holdings Inc has expressed this estimate in a note released on Friday.

Interest rate may increase by 25bps in February: Nomura

Nomura estimates that the Reserve Bank of India may decide to increase the repo rate by another 25 basis points in its Monetary Policy Committee (MPC) meeting to be held in February. But after this, maintaining the country’s growth rate at a high level will become a big challenge in the coming days. Nomura believes that India’s GDP growth rate could come down to 4.5 per cent in the second half of 2023. In these circumstances, RBI may have to cut interest rates by up to 75 basis points to increase the growth rate.

RBI has increased the repo rate 5 times in the last year

In fact, the Reserve Bank of India has increased interest rates continuously last year to control inflation. After this increase made five times from May 2022 to December, the repo rate has reached 6.25 percent, which is the highest level of interest rates in the last about 4 years. If there is a further increase of 25 basis points in February, then the repo rate will reach 6.50 percent.

Growth rate may fall due to international factors: Nomura

According to Bloomberg, Nomura’s note prepared under the leadership of economist Sonal Verma said, “Due to international factors, India’s growth rate is expected to fall to 4.5 per cent in 2023, after which during the second half of the year.” Interest rates may have to be cut by 75 basis points. If this happens, then by the end of the year the policy interest rate may come down to 5.75 per cent. Economists at Nomura have said in their note that the fundamentals of the Indian economy are in good condition, but due to weakness in exports and industrial growth, there may be a slowdown in investment demand. Experts believe that despite internal strength, the Indian economy may face challenges in terms of demand due to rising prices and interest rates.

Nomura accurately predicted interest rates to rise in 2022

Nomura is the first financial services company, which has predicted such a reduction in interest rates during 2023. Earlier, Goldman Sachs in its 2023 outlook had predicted a 25 basis points cut in policy interest rates during the October-December quarter. Nomura had predicted long ago last year that a phase of interest rate hike may begin in India to control prices. However, till that time the Reserve Bank was telling the pressure of prices as temporary.

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