India's Economic Growth Loses Momentum: Slowest Quarterly Growth in 18 Months Expected

Analysts predict that India's economy grew at its slowest pace in 18 months during the July to September period. The main reason for the slowdown is weak urban consumption triggered by rising food prices, despite increased government spending. A survey of economists by Reuters indicates that the Gross Domestic Product (GDP) in the said quarter is expected to have grown by only 6.5% compared to the previous year. This is below the central bank's estimates, which anticipated 7%, and below the 6.7% growth in the preceding quarter. The Gross Value Added (GVA) is expected to rise only by 6.3%, compared to 6.8% in the previous quarter. If these forecasts hold true, it would be the third consecutive quarter of declining growth; nevertheless, India would remain the fastest-growing large economy in the world. The Reserve Bank of India (RBI) has retained its GDP growth forecast for the current fiscal year at 7.2%, compared to 8.2% in the previous year, even as some private economists have lowered their predictions. The National Statistical Office will announce the GDP figures for the July to September quarter on Friday at 10:30 am GMT. Private consumption, which accounts for around 60% of India's GDP, has been weighed down by a slowdown in urban spending. This is due to higher food prices, increased borrowing costs, and stagnant real wages, although demand in rural areas seems to be recovering. Notably, retail food prices, which make up almost half of the consumption basket, rose by 10.87% in October compared to the previous year, thus impairing household purchasing power. Toshi Jain, an economist at J.P. Morgan, highlighted that recent months have shown a cooling of indicators such as industrial production, fuel consumption, and bank credit growth, further hindering growth. Weak corporate performance has further affected economic momentum, even though government spending picked up during the period in question. Meanwhile, leading Indian companies recorded their worst quarterly results in over four years, raising concerns that the emerging economic weakness may now also affect corporate profits and investment plans. Economists in a Reuters survey expect that next week the RBI will keep its policy rates unchanged, given concerns about high retail inflation. A recent decision by the RBI to keep the policy rate at 6.50%, while setting the monetary policy stance to "neutral," underscores the current challenges.