Indian GDP growth to pick up to 7.8% in 2016-17: Nomura

New Delhi: India's GDP growth is likely to pick up to 7.8 percent in fiscal 2016-17 from 7.6 percent this year, largely driven by higher discretionary demand, a Nomura report said on Wednesday.

According to the Japanese financial services major, the pick up in growth numbers would be driven by several factors including higher discretionary demand on Pay Commission wage hike, low inflation, high corporate profitability, ongoing implementation of public capex and an accommodative monetary policy stance.

"In our base case, we expect GDP growth (at market prices) to pick up to 7.8 percent in FY17 from 7.6 percent in FY16," Nomura said in a research note.

On Reserve Bank's policy stance, the report said since the government stuck to its fiscal consolidation roadmap in the Budget, there is scope for further easing.

"We expect the Reserve Bank of India to deliver a 25 bps rate cut in April to support growth, as the government has stuck to its fiscal consolidation targets," Nomura said.

RBI Governor Raghuram Rajan on February 2 had left the key interest rate unchanged citing inflation risks and growth concerns, while pegging further easing of monetary policy to the government's Budget proposals.

Meanwhile, manufacturing activity in early 2016 (January-February) has picked up, indicating manufacturing activity at end-2015 was indeed weighed down by one-off factors like Chennai floods and Diwali holidays.

According to Nikkei India PMI Index, India's manufacturing growth remained unchanged in February at 51.1 in from January reading, which was a four-month high.

This was the second consecutive monthly improvement in business conditions across the sector.