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India's latest gross domestic product data -- released on 31 August -- indicated that though domestic demand improved in the June quarter, growth was much slower in the sectors hardest hit by the pandemic, signalling deeper scarring and lower trend growth, rating agency Nomura said on 2 September.
Domestic demand momentum did improve sequentially in the April-June period, however, slow recovery in the pandemic-hit sectors suggests lower post-pandemic trend growth, Nomura's chief economist Sonal Varma said.
"Despite reopening benefiting the contact intensive services sectors, the underwhelming performance of the most vulnerable segments suggests potentially deeper scarring," Varma said.
According to her, three sectors - manufacturing, construction and trade, and hotels, transport and communication - showed disappointing GDP momentum in the June quarter. She added that outside agriculture, these three sectors employ more unorganised sector workers.
"Their slower rebound, despite reopening, suggests firms have either shutdown or are no longer contributing to production, whereas larger firms have thrived and gained market shares," she noted.
Meanwhile, Nomura expects India's GDP growth to slow from 7.0% year-on-year in the current fiscal to 5.2% in the 2023-24 fiscal year.
With PTI inputs.