India's GDP Growth Likely Slowed To 6.9% In December Quarter: Poll

Economy likely grew at its slowest pace in over a year, shows poll Weaker rural incomes, softer urban demand likely weighed on consumption Official GDP data will be released on Thursday

GDP growth: Weaker rural incomes and softer urban demand likely weighed on consumption
GDP growth: Weaker rural incomes and softer urban demand likely weighed on consumption

India's GDP growth likely stood at its slowest pace in over a year in the October-December quarter as weaker rural incomes and softer urban demand weighed on consumption, a poll by news agency Reuters showed. The median forecast from more than 55 economists polled on February 19-25 was for GDP growth of 6.9 per cent, compared with 7.1 per cent in July-September.

"Consumption drivers should remain modest as tight liquidity persisted through most of the quarter and farm distress restrained rural consumption," said Charu Chanana, emerging Asia economist at Continuum Economics.

Forecasts for the GDP growth number, due for release on February 28 at 5:30 pm, ranged between 6.3 per cent and 7.9 per cent, and suggested a significant drop from a more than two-year high of 8.2 per cent in April-June 2018.

The latest poll was conducted amid political uncertainty ahead of a general election due by May and a weakening global economy.

A slowdown in GDP growth momentum supported the Reserve Bank of India's sudden dovish turn in early February when it cut rates and changed its policy stance to "neutral" to boost expansion after a sharp fall in inflation.

However, global uncertainty over trade conflicts, Brexit and oil prices could add to growth headwinds in India, the RBI's Monetary Policy Committee said.

"The RBI's commentary on growth and the upcoming GDP data should support the central bank's surprise cut... there should be more dovishness in the next meeting, because of the ongoing slowdown," said Shashank Mendiratta, economist at IBM.

A slowing GDP growth could be a concern for Prime Minister Narendra Modi's government, which wants to boost lending and lift growth before the election.

In its final budget for this term, the government introduced several tax cuts to support spending and growth in a bid to lure middle-class voters.

"I think their stance from here would be to show that they have pulled out all the stops and that they've got a few more rabbits to pull out of the hat if they were to win the election," said Vishnu Varathan, head of economics and strategy for Asia at Mizuho Bank.

Gross value added growth (GVA), the government's preferred measure, is expected to be 6.7 per cent in the October-December quarter, marginally down from 6.9 per cent in the previous three months.