According to Nomura’s chief India economist Sonal Varma, near-term risks of a resurgent pandemic are unlikely to derail the country’s growth in 2021. It is therefore projected to eclipse China (2021 GDP growth pegged at nine percent) and Singapore (at 7.5 percent) during that period.
The positive outlook by Nomura comes after nearly two years during which it had turned negative on India’s growth.
“We project GDP growth to remain in negative territory in Q1-2021 (-1.2 percent), pick up to 32.4 percent in Q2 on base effects, before easing to 10.2 percent in Q3 and 4.6 percent in Q4. Overall, we expect GDP growth to average 9.9 percent in 2021 versus -7.1 percent in 2020, and 11.9 percent in FY22 (year ending March 2022) versus -8.2 percent in FY21,” wrote Sonal Varma in Nomura’s Asia 2021 Outlook.
However, being the fastest-growing economy could come with its own challenges, according to the report. A key concern in 2021 and beyond, Nomura said, is the implication of the K-shaped recovery seen until now. A slower pace of recovery in the informal sector implies jobless recovery and can lead to lower per-capita income, higher inequality and so on.
“Owing to the lack of job creation, the cycle’s durability could be on shaky ground. For 2021, however, we believe risks are skewed towards an upside surprise on both growth and inflation, relative to consensus and the RBI’s (Reserve Bank of India) projections,” said Nomura.
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