Indian economy likely to grow 7.3% in July–September quarter – Reuters poll
India’s economy is likely to grow by 7.3% in the July–September quarter, according to a Reuters poll of economists, supported by strong rural and government spending even as private capital spending remains weak.
Household consumption, which accounts for about 60% of the economy, strengthened in the previous quarter as rural spending increased along with improving agricultural output. Urban demand and private investment continue to slow, showing uneven growth in Asia’s third-largest economy.
Government spending, a key driver of growth in recent years, is also likely to persist in the second quarter of this fiscal year.
India remains one of the world’s fastest-growing economies after US President Donald Trump raised tariffs on Indian goods to 50% in August, a move that contributed to foreign investors withdrawing a net $16 billion from Indian equities so far this year.
Most economists say the deflator, which is used to strip out the impact of inflation to show “real” economic growth, is likely to be very low, making Asia’s third-largest economy appear slightly stronger than it actually is.
India’s gross domestic product (GDP) increased by 7.3% year-on-year in the July–September period, down from an estimated 7.8% in the previous quarter, according to the median estimate from a Reuters poll of 61 economists conducted Nov. 18-24. Estimates range from 6.0% to 8.5%.
“As far as growth drivers are concerned, private consumption and central government capex will remain the main drivers of growth for now, while private sector capex investment is likely to grow more slowly due to lingering global uncertainties,” Kaushik Das, chief India economist at Deutsche Bank, said.
The data will be released on Friday, November 28 at 10:30 GMT.
Economists are more cautious on the medium-term outlook, expecting GDP growth to slow to 6.8% this quarter and 6.3% in the quarter ending March 2026.
IMPROVED STATISTICS
The low deflator – which falls when inflation eases – also provided a boost to the latest data, as it did in previous quarters, some economists said.
“GDP will benefit from a lower base and a very low deflator, which will artificially prop up real GDP growth… But nominal GDP growth will likely continue to be weak,” said Deutsche Bank’s Das.
Wholesale price inflation was negligible and consumer inflation averaged around 2% between July – September.
Inflation has fallen to less than half a percent.
“Inflation projections for the rest of the year also remain weak,” said Rajni Thakur, chief economist at L&T Finance. “We really don’t see this deflator support – which statistically impacts real GDP numbers – going away until the end of this fiscal year.”
Economic activity as measured by gross value added (GVA) is estimated to increase by 7.15%. Nominal GDP growth, unadjusted for price changes, likely slowed to 8.3% in the latest quarter from 8.8% previously, the poll predicted. This is based on a smaller sample of forecasters.
Meanwhile, the recent consumption tax cut, which is part of a major overhaul of the national goods and services tax (GST) system and implemented from September 22, is expected to provide support to demand in the coming quarters.
“Unfortunately, the GST cuts come at a time when Indian households are already deeply in debt. This takes away some of the income they could have saved from the tax cuts,” said Dhiraj Nim, economist at ANZ.
Source: Reuters
