The revision reflected the pandemic drag on the economy and marginally lower retail inflation, the firm said in a report on Friday.
In a previous report at the beginning of the month, Nomura had warned that the economy’s growth could fall to 12.2% if the second wave of Covid-19 worsened.
The report also revised its gross domestic product (GDP) growth projection to 11.5% for the ongoing calendar year from 12.4% before.
However, the current lockdowns appear benign as they affect only a few contact-based sectors even as firms and consumers seem to have adapted to the new normal.
While high-frequency data suggested an impact to business resumption as mobility was hit, real economy indicators remained somewhat resilient, said the report titled ‘India: Standing tall amid second wave’.
“We expect the second wave to result in weaker sequential momentum in Q2 (Q1FY22), owing to the lockdowns, but the broader growth upcycle to remain intact due to ongoing vaccinations, the lagged impact of easy financial conditions, front loaded fiscal activism and strong global growth,” said Nomura economists Sonal Varma and Aurodeep Nandi in the report.
The firm projected growth in the April-June quarter at 32.5%, down from 34.5% earlier, on the base of the massive 24.4% contraction seen during the first quarter of the last fiscal.
Nomura pegged retail inflation at 4.7% in 2021, down from 5% earlier but still above the 4% midpoint of the Reserve Bank of India’s inflation target range, while core inflation would remain elevated at 5.7%.
The moderation of near-term inflation was largely due to the volatile vegetable component, whereas the broad-based rise in commodity prices and higher freight costs have squeezed manufacturers’ profit margins and resulted in some of these costs being passed on to consumers, it said.