The change in stance comes after nearly two years (end-2018) when it had turned negative on India’s growth

India has the potential to be the fastest-growing Asian economy in 2021 with the gross domestic product (GDP) growing at 9.9 percent, eclipsing China and Singapore, according to a forecast by a Japanese financial holding company.
Nomura has turned positive on India's cyclical outlook for 2021 and believes the country is on the cusp of a cyclical recovery. The change in stance comes after nearly two years (end-2018) when 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," the Business Standard report quoted the Nomura report as saying.

Further, the Japanese financial holding company expects the Reserve Bank of India (RBI) to maintain an accommodative stance in the first half of the calendar year 2021 (H1- 2021) and a gradual withdrawal of liquidity in the first/second quarter (Q1/Q2) of 2021, shift to a neutral stance in Q2/Q3CY21, followed by higher policy rates in early 2022.

At a macro level, Nomura expects global growth to pick up from negative 3.7 percent in 2020 to 5.6 percent in 2021, with growth in H1-2021 averaging around 7.8 percent y-o-y (owing to base effect).

Meanwhile, it said that the fastest-growing tag in 2021 will come with its challenges. A slower pace of recovery in the informal sector implies the cyclical recovery may be jobless and can lead to lower per-capita income, higher inequality, pressure for more populist spending by the government, and social tensions.

Read the full report in Business Standard