Informist Poll
India Jul-Sept GDP growth seen easing to 6-qtr low of 6.5%
This story was originally published at 19:49 IST on 26 November 2024
Register to read our real-time news.Informist, Tuesday, Nov. 26, 2024
By Shubham Rana
NEW DELHI – The Indian economy likely expanded at a six-quarter low pace of 6.5% in the quarter ended September, pulled down by a slowdown in industrial activity and lacklustre consumption growth, according to an Informist poll of 21 economists.
The National Statistical Office will release the GDP data for Jul-Sept on Friday at a new time of 1600 IST, 90 minutes earlier than the previous time of 1730 IST. The statistics ministry has also advanced the time for release of the CPI and the Index of Industrial Production data to 1600 IST.
Economists' forecast for Jul-Sept is well below the Monetary Policy Committee’s projection of 7.0%. It is even below the 6.7% projected by the Reserve Bank of India staff’s economic activity index. India's GDP had grown 8.1% in Jul-Sept last year and had declined to a five-quarter low of 6.7% in Apr-Jun, mainly because of a modest pace of government capital expenditure.
Government capital spending picked up in Jul-Sept, rising 10.3% on year, compared with a 35.0?ll in Apr-Jun. However, this rise in spending has been offset by a moderation in industrial activity in Jul-Sept, economists said.
"Several sectors faced headwinds on account of heavy rainfall, which affected mining activity, electricity demand and retail footfalls, and a contraction in merchandise exports," said Aditi Nayar, chief economist at rating agency ICRA, in a note. "Further, margins appear to have weakened for corporates in a variety of sectors in this quarter."
Urban demand also remained a sore point for India's economic activity last quarter, even as rural consumption continued to pick up, economists said. In its Monthly Economic Review for September, the finance ministry had cautioned against slowing urban demand. "Urban demand appears to moderate due to softening consumer sentiments, limited footfall due to above-normal rainfall, and seasonal periods during which people tend to refrain from new purchases," the report had said.
Economists, however, expect both urban and rural demand to improve. "Going forward, favourable agricultural output and a hike in MSP (minimum support price) for rabi crop should ensure rural demand remains buoyant," ICICI Bank said in a report. "Urban demand should improve with a lag once hiring improves in coming quarters and inflation moderates."
Along with lower GDP growth, economists also expect gross value added growth to have slowed down in Jul-Sept. According to the median of 16 economists, gross value added growth is seen falling to 6.4% in Jul-Sept from 6.8% in Apr-Jun.
There was a sharp divergence between GDP growth and gross value added growth in the second half of 2023-24 (Apr-Mar). India's GDP grew 7.8% in Jan-Mar, while gross value added growth lagged well behind at 6.3%. This wedge between GDP growth and gross value added growth was because of a rise in net taxes.
Net taxes, the difference between indirect taxes and subsidies, rose 4.1% in the first quarter of the FY25. In Jan-Mar and Oct-Dec, net taxes rose 22.2% and 31.2%, respectively. As GDP is calculated by adding net taxes to gross value added, these strong growth rates in net taxes gave an outsized boost to GDP growth in FY24.
The Jul-Sept GDP growth print will be keenly watched by policymakers and market participants as a below-expected number could increase the chances on an interest rate cut by the MPC in FY25. While economists don't see a rate cut in the December MPC meeting, because of a sharp rise in CPI inflation in October to 6.21%, a lower-than-expected GDP print could firm up expectations of a cut in February, economists said.
Summary of the Informist poll on GDP growth in Jul-Sept:
Range of expectations: 6.2-6.9%
Mean: 6.5%
Median: 6.5%
Mode: 6.5%
|
ORGANISATION |
GDP GROWTH ESTIMATE |
GVA GROWTH ESTIMATE |
|
Barclays |
6.2% |
-- |
|
Capital Economics |
6.2% |
-- |
|
IDFC FIRST Bank |
6.2% |
6.1% |
|
Motilal Oswal Financial Services |
6.2% |
6.3% |
|
YES Bank |
6.2% |
6.0% |
|
HDFC Bank |
6.3% |
6.2% |
|
Nirmal Bang Institutional Equities |
6.4% |
6.4% |
|
CRISIL |
6.5% |
-- |
|
ICICI Securities Primary Dealership |
6.5% |
6.4% |
|
ICRA |
6.5% |
6.6% |
|
Kotak Mahindra Bank |
6.5% |
6.4% |
|
Moody's Analytics |
6.5% |
-- |
|
QuantEco Research |
6.5% |
6.4% |
|
State Bank Of India |
6.5% |
6.6% |
|
Union Bank of India |
6.5% |
6.4% |
|
ICICI Bank |
6.6% |
6.6% |
|
India Ratings and Research |
6.6% |
6.3% |
|
STCI Primary Dealer |
6.6% |
6.5% |
|
Standard Chartered |
6.7% |
6.8% |
|
Bank of Baroda |
6.8-6.9% |
6.3-6.4% |
|
Nomura |
6.9% |
-- |
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Akul Nishant Akhoury
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