Policy continuity is key if India wants to see strong economic growth in the next 5 years, Nomura says

Optimism in India's growth shows little signs of slowing, but policy continuity will be crucial if it wants to see strong growth in the next five years, Rob Subbaraman, Nomura's chief economist and head of global markets research Asia ex-Japan, said. 

"The Modi administration in Modi 2.0 has done a very good job," Subbaraman told CNBC last week, referring to the fact that Modi and his ruling Bharatiya Janata Party have won two terms in office since 2014.

India's elections are underway and Modi is widely expected to win a strong mandate for a third term in office.

Nomura has projected that India's economy could grow by an average of 7% in the next five years — if the current policies driving growth stay in place, Subbaraman said on Friday.

That projection is much higher than Nomura's growth outlook for China (3.9%), Singapore (2.5%) and South Korea (1.8%) in the same period. 

"With China's economy slowing, India is likely to be the fastest growing Asian economy this decade," Nomura said in a recent note. 

"Irrespective of the election outcome, policy continuity and a focus on macroeconomic stability are important growth underpinnings," the bank's analysts added. 

Under Modi's rule, India's economy is expected to grow 6.7% this year, compared to China's predicted growth of 4%, Nomura's projections showed. Large economies outside Asia like the U.S. could also see slower growth at 2.8% this year.

"The big thing that's changing in India is investment," Subbaraman said. "Investment as a share of GDP is starting to rise. All the stars are aligned for private capex to start igniting, including FDI [foreign direct investments]."

While Nomura is bullish on India, the firm's chief economist for India and Asia (ex-Japan), Sonal Varma, warned