The Fragile Pillars of 7.8% Economic Growth: Nomura Insights

India's impressive 7.8% economic growth in the June quarter should not be mistaken for inherent strength in demand, warns Japanese brokerage firm Nomura. The growth figures are largely attributed to low inflation rates and strategic export frontloading before the impact of U.S. tariffs is fully realized.

Nomura advises a series of policy interventions to bolster the economy, including a 50 basis point reduction in repo rates to stimulate domestic demand, diversify exports, and provide fiscal and credit support to affected industries. The brokerage also suggests reforms to further anchor economic stability.

The broader economic outlook remains uncertain, with growth expected to drop from 7.4% in Q2 to 6% in Q3 and down to 5.6% in Q4. Sectors involving textiles and seafood face particular challenges, potentially triggering job losses and affecting the investment climate. Nomura emphasizes that these challenges necessitate a comprehensive policy response.