ET poll sees India's growth at 6.6% in Q3, 7% for FY24

India likely grew 6.6% in the third quarter this fiscal year, according to the median of estimates in an ET poll of 15 economists, decelerating from 7.6% in the preceding three months. Forecasts ranged from 6% to 7.2% for the quarter ended December. The Reserve Bank of India estimates the economy to have grown 6.5% in the period. The government is scheduled to release the data on Thursday.

Monetary policy may weigh
"A slowdown in state-led capex, which has been propelling investment, likely contributed to the expected deceleration in Q3," said Rahul Bajoria, managing director and head of EM Asia (ex-China) economics at Barclays.


Experts said the agriculture sector may have also contributed to the slowdown, even as industry and services kept the economy growing. "The agricultural sector is expected to experience a pronounced slowdown due to diminished rainfall activity and subsequent declines in reservoir levels," said Rajani Sinha, chief economist at CareEdge. "After a lower-than-projected kharif output, rabi sowing has exhibited a sluggish trend through most of the season, except for an uptick in the last couple of weeks," Sinha said.

Growth is expected to slow further in the fourth quarter as the tight monetary policy starts to weigh on economic activity.

The poll pegged FY24 growth at 7.0%, lower than the first advance estimate of 7.3% but higher than the International Monetary Fund's projection of 6.7%. RBI also projects FY24 growth at 7.0%.

"We expect a relative slowing of the economy in the second half of the year due to passthrough of the previous monetary policy actions," said Indranil Pan, chief economist at Yes Bank. "However, it will remain strong despite the likely slowdown in the rest of the world - benefiting from the lower trade gap on the expenditure side."

Outlook
Economists expect growth momentum to continue in the coming fiscal year, but were less optimistic than RBI. The median growth estimate for FY25 in the ET poll is 6.5%, lower than the 7.0% expansion projected by the central bank.

"Pickup in private sector investment has so far been mainly in the infrastructure sector," said CareEdge's Sinha. "However, we do expect overall private sector investment to pick up gradually in the next few quarters, as there is more policy certainty post the general elections."

On the inflation front, the economists were optimistic. They projected inflation to ease to 4.6% in FY25, closer to RBI's target of 4%, from 5.4% in the current fiscal year.

"While core inflation is likely to remain in the comfort zone, we expect it to start inching up in the second half of the next fiscal year as growth momentum gathers pace in the domestic and global economy," said Sinha.

Experts expect the central bank to cut the policy rate by a quarter percentage point in either the June or August policy meeting. RBI kept the rate on hold at 6.5% for the sixth consecutive time earlier this month.