This meant that economic turmoil did not bottom out in the April–June quarter, the report said. That quarter saw gross domestic product
(GDP) growing at 5 per cent, the slowest in more than six years.
This could assume importance on the backdrop of an expected rate cut by the monetary policy committee (MPC) of the Reserve Bank of India (RBI) on Friday. Nomura
expects the RBI’s MPC to cut the repo rate by 40 basis points, to take it to 5 per cent.
“Railway traffic, cars and two-wheeler sales, medium and heavy commercial vehicles sales, and non-oil, non-gold imports are the indicators, which are the biggest drag on the economic momentum in August,” Sonal Varma,
India and Asia ex-Japan chief economist at Nomura
told Business Standard.
Nomura was the first global agency to slash the growth forecast for the Indian economy to 6 per cent earlier this year. The RBI reduced the estimate of GDP growth in FY20 to 6.9 per cent in the August MPC meeting.
The report also said that with this development, the downside risks to the annual FY20 forecast of 6 per cent have become stronger.
Core sector companies produced lower than a year ago in August; imports also contracted during the same month, government data had shown.
The MAI had always grown since 2007, Nomura data showed. This is the first time it has contracted since the pre-crisis years. Tighter financial conditions because of a crisis in the non-banking financial companies (NBFC) sector played a much bigger role than anticipated, the report said.