India’s economy grew by 6.2 percent in the October-to-December period, marginally below expectations, but faster than in the previous quarter, on the back of increased government and consumer spending, data released yesterday showed.
The growth in GDP was slightly lower than the 6.3 percent expansion projected by analysts in a Reuters poll, and the central bank’s estimate of 6.8 percent. The world’s fifth-biggest economy grew 5.6 percent in the previous quarter.
The third-quarter GDP growth is marginally better than expectations, IDFC First Bank India economist Gaura Sengupta said.
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The pickup in growth momentum reflects some improvement in listed companies’ profit growth with moderation in input cost, she added.
Agriculture growth also showed a strong pickup, led by robust Kharif crop output. Meanwhile, on the demand side, private consumption growth picked up reflecting revival in rural demand.
“After incorporating Q3 FY25 GDP, we still see FY25 full-year GDP at 6.2 percent to 6.3 percent. We continue to expect a shallow rate-cut cycle from the [Reserve Bank of India] RBI with another 25bps to 50bps cut in 2025. Depreciation pressure on INR [rupee] will keep the rate-cut cycle shallow in our view,” she said.
Stepping back, the big picture is that the economy is still fairly soft by India’s recent standards.
Capital Economics assistant economist Harry Chambers said that with the RBI shifting its priorities from controlling inflation to supporting growth, economic activity should begin to pick up further.
This week’s reversal of the tighter bank lending restrictions introduced in late 2023, as well as the further monetary policy loosening expected from the central bank, would boost household consumption and investment, he said.
Emkay Global Financial Services chief economist Madhavi Arora said: “Massive upward revisions to past years and quarters have made the GDP forecast exercise extremely dynamic. However, backed by the current quarterly estimates by [National Statistical Office] NSO for FY25TD, the implied 4QFY25 GDP estimate appears to be a high 7.7 percent, a tall ask given the current macro dynamics.”
Another economist, Jahnavi Prabhakar from the Bank of Baroda said: “[Gross value added] GVA growth for Q3 came in line with our expectations and GDP growth surprised positively.”
However, a strong 6.5 percent growth for this year turns out to be much higher than the RBI estimation is a strong positive, she said.
A further revival is expected in the fourth quarter, supported by consumption spending and a rebound in investment cycle, Prabhakar said, adding that rate cut expectations also bodes well for the growth outlook.
Kotak Mahindra Bank chief economist Upasna Bhardwaj said that despite the sharp upward revisions to the last two years’ GDP figures, this year’s figures appear to have remained resilient, although led largely by the upward revisions to the second-quarter figures.
“We expect the FY25 GDP figure to be lower than the central statistics office’s estimate by around 20-30 basis points,” she said. “We expect FY26 growth of around 6.4 percent, but the outlook remains heavily clouded with downside risks amid global trade uncertainties.”
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