Q3 growth poised for sequential rebound: Nomura

India's GDP growth appears poised for a sequential rebound in Q3, but industrial production could contract sequentially in September and October due to chip and coal shortages, global financial services group Nomura has said.

Its separately released weekly tracker, the Nomura India Business Resumption Index (NIBRI), showed economic activity moderated to 105.3 for the week ended October 24 from an all-time high of 109.2 (revised up from 108.8) in the prior week. Despite the moderation, the index is still 5.3 percentage points above pre-pandemic levels.

Nomura said the country's GDP growth could be about 1.0 percentage point lower in Q4, relative to base case (5.3% y-o-y).


It, however, retained the 2021 and 2022 forecasts of 7.7% and 9.5%, respectively, flagging 'downside risks' for next year such as unresolved supply-side constraints and elevated energy prices.

"We expect industrial production to sequentially contract in September/October," Nomura said.

The supply of coal at power plants has reached historic lows, with barely four days of supply remaining, the agency said in the detailed note.

Referring to data from the Central Electricity Authority, which said that 15 of India's 107 power plants, which account for about 12% of national capacity, were currently running with nil stocks.

The moderation was driven by a sharp drop in Google workplace mobility (-12.3 percentage points over the week) and the Apple driving index (-5.3pp), even though Google retail and recreation mobility rose by 2.3pp, it said. The labour participation rate fell to 40.7% from 41.6% and power demand fell 3.1% week-on-week from -1.7% previously.