Barclays lowers FY25 GDP growth view to 6.8%; sees Jul-Sept print at 6.2%
This story was originally published at 16:14 IST on 8 November 2024
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NEW DELHI – Economists at Barclays, a bank, have lowered their India GDP growth estimate for 2024-25 (Apr-Mar) by 20 basis points to 6.8% on the back of slowing urban demand and "sluggish pace of capital expenditure". Barclays sees Jul-Sept GDP growth coming in at 6.2%, much lower than the Reserve Bank of India's forecast of 7.0%.
Earlier this week, State Bank of India's research team projected Jul-Sept GDP growth at around 6.5%. The Indian economy grew 6.7% in Apr-Jun.
Barclays' full year GDP growth estimate of 6.8% is 40 bps is also lower than the RBI's projection of 7.2%. With growth seen slowing down in FY25, the RBI's Monetary Policy Committee is likely to lower the repo rate in December, Barclays economists Shreya Sodhani and Amruta Ghare said in a report on Friday.
"While the festive season may show improvement in demand quarter on quarter, we think slowing urban demand, weakness in exports, and sluggish pace of capex will likely weigh on growth in Oct-Mar," Barclays said. "Following two consecutive lower-than-expected growth prints, we think the RBI is likely to reduce its FY25 growth projection at the December meeting, paving the way to ease policy to support growth," the report said.
While growth is seen moderating, inflation is expected to stay high in the near term. Barclays expects CPI inflation to rise to 5.7% in October from 5.5% in September. According to an Informist poll of 20 economists, headline CPI inflation likely rose to a 14-month high of 5.9% in October. The CPI inflation data for October will be released at 1600 IST on Tuesday.
Post November, however, inflation is seen coming down, Barclays said. "We expect inflation to moderate from November, as the harvested kharif crops hit the market," Sodhani and Ghare noted.
"The unanimous change in the policy stance (to netural from withdrawal of accommodation) in October, in our view, shows the MPC's desire to have the flexibility to cut rates given its increasing comfort on the inflation trajectory," Barclays said. "A lower growth forecast, accompanied by the expectation that inflation is likely to slow, should tilt the balance for the MPC to deliver the first cut at the Dec. 6 meeting, in our view."
Sodhani and Ghare said there is a high risk that the timing of the first rate cut since May 2020 could be delayed from December, especially if November food price pressures remain high. Barclays expects 75 bps of rate cuts in this cycle, but "see the risk of fewer or back-loaded cuts if disinflation is slower or growth momentum picks up more than we expect in Oct-Mar". End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Reported by Shubham Rana
Edited by Akul Nishant Akhoury
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