Nomura today marked down India’s GDP growth forecast marginally to 7.7 per cent for the current fiscal, from 7.8 per cent earlier, saying there is still no sign of an export or private capex turnaround.

The Indian economy grew at 7.9 per cent in the fourth quarter of 2015-16 taking the overall GDP growth for the last fiscal to a five-year high of 7.6 per cent.

Nomura said the headline GDP data suggests that the underlying recovery continues at a gradual pace but it is narrowly based, driven primarily by private consumption.

Going forward, there are three positive impulses to growth — the seventh pay commission hikes, a normal monsoon and ongoing public capex, Nomura said, adding that “at the same time, our leading indicators suggest that there is still no sign of an export or private capex turnaround”.

“As a result, while we expect GDP growth to still improve in FY17, we have marginally marked down our forecasts. We expect GDP growth to rise to 7.7 per cent y-o-y in 2016-17 (earlier: 7.8 per cent) from 7.6 per cent in 2015-16,” it added.

Regarding the Reserve Bank of India’s monetary policy stance, the report said the central bank is expected to be on hold this year.

“With inflation remaining sticky at slightly above 5 per cent and growth fairly steady (although uneven), we expect policy rates to stay on hold until end-2016 (including at the upcoming policy meeting on June 7) with the focus shifting to liquidity provision,” said the report by the Japanese financial service major.

In April, RBI cut policy rate by 0.25 per cent to 6.5 per cent. While this was the first rate cut after a gap of six months, RBI has lowered its rate by 1.5 per cent cumulatively since January 2015.

However, the industry still wants further rate cuts from the apex bank to boost investment.

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