India's economic momentum threatened by sluggish external demand

Only 5.6% GDP growth is seen in FY14.

According to Nomura, economic momentum has decelerated sharply at a time of weak external demand and limited space for monetary or fiscal stimulus. The lagged effect of weak manufacturing output is hurting demand for private services and reforms will likely have a meaningful impact only after a lag.  

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We are currently penciling in a pickup in India‟s growth from Q4 CY2013 aided by better global demand and a pickup in government spending ahead of elections. 

However, with leading indicators pointing to a flattish H1 FY14 (year ending March 2014), there are risks to this view. We remain comfortable with our below consensus GDP growth forecast of 5.6% y-o-y in FY14 (Consensus: 6.3%).