MUMBAI: A post-festival moderation in growth, as indicated by various economic reports, could lead to lower-than-projected growth in the third quarter. While October saw a spike in economic activity, it tapered down in November as was first seen in indicators like payments.
Current high-frequency indicators reflect a slowing of momentum, according to Kaushik Das, an economist with Deutsche Bank. “GST growth in December 2024 was only 7.3% year-on-year, the fourth consecutive month of single-digit growth. Manufacturing PMI for the same period came at 56.4 – a 12-month low.”
“Core infrastructure production growth improved in Nov to 4.3% year-on-year, from 3.7% in October, but remained below the 5% mark. Industrial production growth in Nov is likely to be even lower at 3.8%, though improving slightly from the 3.5% out-turn in Oct,” he added.
According to Das, the growth momentum needs a positive shock given the slowdown, and monetary policy needs to be forward-looking. “We estimate India’s real GDP growth to average about 6.5% YoY in FY25 and FY26, aided by policy support. This will be below the potential growth rate of the economy at 7-7.5%,” he said in a report.
A Motilal Oswal report said that economic indicators revealed divergent trends in Nov and Dec 2024, suggesting an uneven growth trajectory. The report states that real GDP growth for Q3 is expected to rise slightly to 5.5%-5.7% year-on-year, significantly lower than the RBI’s forecast of 6.8%.
According to the report, the Economic Activity Index-to-GDP – which estimates overall economic output – declined for the first time in 28 months, shrinking 0.8% year-on-year in Nov. The contraction follows a 9.3% increase in Oct and 3% growth in Nov 2023, with the decline attributed to a sharp contraction in external trade. Faster growth in imports relative to exports shaved 6.3 percentage points off GDP growth.
“In several high-frequency indicators, Nov was the best month the Indian economy saw through FY24-25, but some moderation is already visible in Dec,” Rahul Bajoria, an economist with Bank of America Global Research, said.
