(Reuters) – India’s economy grew by 6.2% in October-December, marginally below expectations but faster than in the previous quarter on the back of increased government and consumer spending, data released on Friday showed.
The growth in gross domestic product was slightly lower than the 6.3% expansion projected by analysts in a Reuters poll, and the central bank’s estimate of 6.8%. The world’s fifth-biggest economy grew 5.6% in the previous quarter.
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GAURA SEN GUPTA, INDIA ECONOMIST, IDFC FIRST BANK, MUMBAI
The Q3 GDP growth is “marginally better than our expectations”. The pickup in growth moment reflects some improvement in listed companies profit growth with moderation in input cost.
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% to 6.3%. We continue to expect a shallow rate-cut cycle from the RBI (Reserve Bank of India) with another 25bps to 50bps cut in 2025. Depreciation pressure on INR (rupee) will keep the rate-cut cycle shallow in our view.”
HARRY CHAMBERS, ASSISTANT ECONOMIST, CAPITAL ECONOMICS, LONDON
Stepping back, the big picture is that the economy is still fairly soft by India’s recent standards. However, 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 from the “central bank that we expect, will boost household consumption and investment in particular”.
MADHAVI ARORA, CHIEF ECONOMIST, EMKAY GLOBAL FINANCIAL SERVICES, MUMBAI
For the RBI, this number makes little difference to their reaction function immediately, especially as revisions have made the GDP prints very dynamic.
Currently, the CSO’s (Central Statistics Office) number for FY25 has been revised up only by 10bps, thus not necessarily impacting the reaction function of the RBI much, merely on account of this print.
However, “we maintain achieving 6.5% growth in FY25 will require Q4 to print as high as 7.7% — a tall ask given the current macro dynamics, and will still keep the RBI on its toes to support growth amid evolving global order.”
JAHNAVI PRABHAKAR, ECONOMIST, BANK OF BARODA, MUMBAI
“GVA (gross value added) growth for Q3 came in line with our expectations and GDP growth surprised positively.”
However, a strong 6.5% growth for FY25 turns out to be much higher than RBI estimation is a strong positive.
A further revival is expected in the fourth quarter, supported by consumption spending and rebound in investment cycle. Rate-cut expectations also bodes well for the growth outlook.
UPASNA BHARDWAJ, CHIEF ECONOMIST, KOTAK MAHINDRA BANK, MUMBAI
Despite the sharp upward revisions to the last two years’ GDP figures, FY25 figures appear to have remained resilient, although led largely due to 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.”
Further, “we expect FY26 growth of around 6.4% but the outlook remains heavily clouded with downside risks amid global trade uncertainties.”
RADHIKA RAO, SENIOR ECONOMIST, DBS BANK, SINGAPORE
GDP growth numbers were close to expectations. Data signalled a turnaround, reflecting better demand on the back of rural FMCG sales and festive demand, while urban demand stagnated on modest wage growth.
With FY25 trend growth likely to downshift to the 6% handle this year from a revised 9% pace in FY24, food disinflation setting in and successive measures to loosen macroprudential restrictions, policymakers have the room to maintain a dovish tilt.
“We expect a rate cut in April, with a likely shift in the stance to accommodative.”
SAKSHI GUPTA, PRINCIPAL ECONOMIST, HDFC BANK, GURUGRAM
GDP growth for Q3 shows that the “cyclical bottom is most likely behind us as growth showed signs of improvement” in the third quarter. This was supported by better performance in agriculture and some improvement in manufacturing.
On the demand side, consumption growth rose close to 7%, primarily on the back of rural demand recovery, while investment growth continued to remain soft.
“We expect growth at 6.6% in FY26 compared to 6.5% in FY25. While this growth print brings some relief for the central bank, given continued global headwinds, we expect another rate cut in April 2025.”
DEVENDRA KUMAR PANT, CHIEF ECONOMIST, INDIA RATINGS AND RESEARCH, GURUGRAM
The possibility of achieving 6.5% growth in FY25 would depend on growth of individual components, especially consumption expenditure and investment.
KUNAL KUNDU, INDIA ECONOMIST, SOCIETE GENERALE, BENGALURU
Major upward revision of prior-year data makes objective analysis of the 4Q24 GDP data a difficult proposition.
Surprisingly, despite changes, the real GDP growth for Q4 printed in line with consensus estimate of 6.2%, which was based on the unrevised data. Interestingly, major upward revisions of consumption data suggests that the “existing widespread narrative (including ours) of weak domestic demand based on unrevised GDP data and multiple high frequency data was not entirely correct”.
Apparently, even the RBI got the weak domestic demand narrative wrong as well as did the latest economic survey. “Looking purely at the new data set, we would continue to retain our existing growth forecast for FY25 at 6.3% year-on-year, slower than the official second advance estimate expectation of 6.5%.”
(Reporting by Swati Bhat and Siddhi Nayak in Mumbai, Manvi Pant, Kashish Tandon, Hritam Mukherjee, Yagnoseni Das, Anuran Sadhu in Bengaluru, compiled by Indranil Sarkar; Editing by Shilpi Majumdar)
