India's GDP growth likely to rise to 7.8% in FY17: Nomura

India's GDP growth is likely to pick up pace and grow to 7.8% in fiscal 2016-17 from 7.6% 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 7th Pay Commission wage hike, low inflation, high corporate profitability, ongoing implementation of public capital expenditure (Capex) and an accommodative monetary policy stance.

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

 On the Reserve Bank of India's (RBI) policy stance, the report said since the government stuck to its fiscal consolidation roadmap in the Budget 2016, there is scope for further easing.

"We expect the Reserve Bank of India (RBI) to deliver a 25 basis points 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 2016 proposals.

Meanwhile, manufacturing activity in early 2016 (January-February) has picked up, indicating manufacturing activity at the end of 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 has remained unchanged in February at 51.1 from January reading, which was a four-month high. This was the second consecutive monthly improvement in business conditions across the sector.  

ALSO READ: Manufacturing PMI unchanged in February despite rise in new orders