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India's economic growth is likely to remain muted in the first quarter of this calendar year with the GDP likely to grow at 5.7 per cent in the January-March period amid subdued activity, says a report.
According to the global financial services major Nomura, following subdued growth in the first quarter, a V-shaped recovery is on the cards due to remonetisation, wealth redistribution and the lagged effects of lower lending rates.
"We expect growth to remain subdued in the first quarter of 2017 as the activity level remains below its recent peak," Sonal Varma chief India economist at Nomura said in a research note.
Nomura expects economic growth to remain in a downtrend. As per the report, from 7.3 per cent GDP growth in the July-September 2016, the October-December 2016 quarter GDP growth is likely to slow to 6 per cent and further to 5.7 per cent in the first quarter of 2017 (January-March).
"We expect GDP growth to slow from 7.3 per cent in Q3 2016 to 6.0 per cent in Q4 and 5.7 per cent in Q1 2017," it said.
According to official figures, industrial production contracted to a four-month low of 0.4 per cent in December, largely due to decline in production of capital goods and consumer goods.
"The moderation in industrial output growth is not a surprise; weak demand since demonetisation has likely forced companies to cut production in order to clear the excess inventory," Nomura said.
Notwithstanding the improvement in manufacturing PMI in January, industrial output growth should sequentially improve though growth is expected to remain subdued in the first quarter of 2017 as the activity level remains below its recent peak.
"Thereafter, we expect a V-shaped growth recovery to take hold in the second half of 2017, due to remonetisation, wealth redistribution and the lagged effects of lower lending rates," it added.
