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Informist, Friday, Jun. 5, 2026

 

NEW DELHI - Shilan Shah, deputy chief emerging markets economist, Capital Economics, said the following on India's GDP growth of 7.8% for the March quarter:  

 

The GDP data for Jan-Mar show that India's economy continued to grow at a very healthy clip, and more timely indicators point to resilience in the face of the energy shock. There is little in the data to prevent the Reserve Bank of India from tightening policy over the coming months as inflation rises.

 

GDP growth slowed fractionally from 8.0% in Oct-Dec (upwardly revised from 7.8%) to 7.8% in Jan-Mar. That is some way above expectations. The (continued) lack of a back series of data prior to 2022 on the rebased GDP series makes historical comparisons tricky but it is still an enviable rate of growth by global standards. The breakdown shows household consumption holding up well while net exports lagged.

 

The early data for Apr-Jun have been reasonably upbeat. After falling sharply in March, the Purchasing Managers' Indices have since stabilised. The industrial production data have held up well and domestic air travel remains at normal levels.

 

To be clear, we do think the economy will soften. Higher fuel and food prices will weigh on consumption and this doesn't appear an opportune time for firms to make big investment decisions. But we aren't expecting a major slowdown and the economy will probably still grow by 6.5-7% this year.

 

In terms of the monetary policy implications, the central bank kept the repo rate on hold today at 5.25%, but with growth holding up better than it had thought and inflation rising, we maintain our view that interest rate hikes are likely over the coming months. We are forecasting a cumulative 75 basis points of hikes this year, taking the repo rate to 6.00%.  End

 

Compiled by Shubham Rana
Filed by Avishek Dutta

 

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