India's GDP growth expected to be 6.7% YoY in FY25, lower than RBI's forecast of 7.2%: Nomura

They wrote, "Growth signals are currently mixed. Catch-up in government spending and rural demand are positives, but softness in consumer discretionary demand, industrial demand and external demand are negatives."

They added, "On net, we expect GDP growth to soften to 6.7% y-o-y in FY25 (year ending March 2025), below the RBI’s forecast of 7.2%, and we see downside risks to our FY26 GDP forecast (7.2%)."

They looked at the vehicles sales to track cyclical growth and found that both numbers, one which tracks discretionary demand and the other which tracks industrial activity, showed degrowth.

The report stated, "To gauge cyclical growth, we have found that sales of passenger vehicles (PV) and medium and heavy commercial vehicles (MHCV) are important. PVs signal discretionary consumer demand, while MHCV sales have a high beta to overall industrial activity."

It added, "PV and MHCV sales both disappointed in July and August. Wholesale PV sales growth fell to -2.0% y-o-y in July and -2.5% in August, while MHCV sales growth declined to -7.1%
and -10.7%, respectively. Inventories for PVs have risen from 55-60 days in May to 70-75 days in August, with hopes now pinned on the festive season."

The analysts proposed that the moderation may be due to the the fading of post-pandemic pent-up demand, higher interest rates and the slowdown in government spending due to elections.