India’s economy slowed much more than expected in July-September, expanding by only 5.4% year-on-year as growth in manufacturing and consumption decelerated, data showed on Friday.
It was the slowest growth in gross domestic product in seven quarters and well below a 6.5% expansion projected by a Reuters poll and the central bank’s estimate of 7%.
Economists said private consumption, accounting for 60% of GDP, has been hit by slower urban spending due to higher food inflation, high borrowing costs and weak real wage growth, despite a recovery in rural demand.
Manufacturing activity slowed to 2.2% growth year-on-year in July-September, versus 7% growth in the previous quarter.
“The manufacturing sector appears to have taken the maximum beating,” said Upasna Bhardwaj, economist at Kotak Mahindra Bank, estimating that full-year economic growth could be around 6.2%, much lower than the RBI estimates.
GDP growth in July-September eased from 6.7% seen in the previous quarter.
India is still, however, among the fastest growing major economies with government officials forecasting a potential regaining of momentum in the second half of the fiscal year, helped by improved rural demand after a strong monsoon and a pick-up in government spending.
Agricultural output rose 3.5% in July-September from a year earlier, up from 2% growth in the previous quarter.
Private consumer spending rose 6.0% in July-September from a year earlier, compared to 7.4% in the previous quarter.
The gross value added (GVA), a measure of economic activity saw a modest 5.6% growth, easing from a 6.8% increase in the previous quarter.
Indian government spending in real terms rose 4.4% year-on-year in July-September, compared to a 0.2% contraction in the previous quarter, data showed.
India’s finance and trade ministers have called for interest rate cuts, though the central bank is expected to keep policy rates unchanged next week, according to Reuters poll of economists, amid inflationary concerns.
The Reserve Bank of India (RBI) has predicted GDP growth of 7.2%% for the fiscal year ending in March 2025, a forecast that some private economists have revised downward.
