India’s economic growth likely moderated in July-September, primarily due to a slowdown in consumption and investment amid heavy monsoon rains in several parts of the country, according to an ET poll of 10 economists. The poll’s median estimate for gross domestic product (GDP) growth in the second quarter is 6.8% year on year, with estimates ranging from 6.5% to 7%.
The economy expanded a robust 8.1% in the corresponding period last year, and 6.7% in the first quarter of this financial year. The Reserve Bank of India has revised its growth projections for the September quarter to 7%, from 7.2% in its monetary policy meeting last month. Official numbers will be released on November 29.
“Diesel and electricity consumption is lower in the second quarter, partly due to heavy rainfall in August and September,” said Sakshi Gupta, principal economist at HDFC Bank.
Global slump a factor
“Additionally, passenger vehicles and two-wheeler sales have also slowed,” said Gupta of HDFC Bank. Aditi Nayar, chief economist at ratings firm ICRA, pegged GDP growth for the September quarter at 6.7% and gross value added (GVA) growth at around 6.4% due to heavy rainfall affecting mining, electricity, and retail footfall relative to the initial print for April-June. Early corporate results for the quarter also suggest a softness in the economy. An ETIG analysis of results of 175 companies showed revenue and net profit rose by 7.2% and 2.5%, respectively. Revenue growth was the slowest in five quarters, while the profit advance was at a six-quarter low.
External triggers
The global slowdown could have also impacted growth, noted Upasna Bhardwaj, chief economist at Kotak Mahindra Bank. She remains cautiously optimistic about rural demand but expects urban demand to show some weakness. Increasing bilateral tensions with Canada, the escalating conflict in West Asia, and the continuing Russia-Ukraine war have impacted exports from India. Merchandise exports dropped 3.7% in the quarter from a year earlier, showed an analysis of monthly data. Several sectors of the domestic economy were also soft. “Tepid growth in consumer goods production, unsecured loan growth, and core imports will contribute to the slowdown,” said Radhika Rao, senior economist at DBS Bank. Both fixed investment and exports might lose momentum, reflecting continued normalization of public infrastructure investment and softer external demand, according to Hanna Luchnikava-Schorsch, head of Asia-Pacific economics at S&P Global Market Intelligence.
Consumption & inflation
The manufacturing and services Purchasing Managers Index (PMI) for September by HSBC indicated a slowing momentum. India’s core sector output has been volatile and low—growing 6.1% in July, falling by 1.6% in August, and growing 2% in September. Food inflation will remain a critical factor impacting consumer sentiment and spending in the coming quarters, said Rajani Sinha, chief economist at CareEdge Ratings. “Weak demand in China and the resultant flooding of goods in the Indian market has been a dampener for domestic private investment,” she said.
Annual outlook unchanged
Polled economists, though, believe the slowdown in the second quarter will not hinder the overall growth rate for the year. Projections suggest the economy will grow between 6.8% and 7.1% in FY25. “If consumption and investment don’t pick up in the second quarter, estimates may be revised downwards, but growth is expected to remain above 7% for FY25,” said Madan Sabnavis, chief economist at the Bank of Baroda. There will be a double-digit growth in consumption and 8-10% growth in investment, with a revival in non-premium consumption and rural consumption, he said. Gaura Sengupta, economist at IDFC First Bank, noted that while growth figures are lower than FY24, they are still robust. “Factors that supported FY24, such as a slowdown in GDP deflator, contraction in subsidy expenditure, and decline in input cost, leading to profit boost for listed companies, will be missing in FY25,” she said.RBI has retained its growth forecast at 7.2% for FY25. Further recovery in private sector activity—particularly household expenditure—driven by improving rural incomes following a good monsoon and additional social support announced in the 2025 budget, will be key drivers of growth, said Luchnikava-Schorsch. Both the World Bank and International Monetary Fund have projected 7% growth for India for FY25.
