India GDP: Economists Say Achieving Q4 Estimate Unlikely

The gross domestic product grew 6.2% over a year earlier in the October-December quarter, compared with a revised growth of 5.6% in the July-September quarter. For the full year, GDP growth is pegged at 6.5% as per the second advance estimates, implying a growth of 7.6% in the January-March quarter.

Despite a continuing uptick in high frequency indicators, GDP growth in Q4 might come in lower.

NSO's implied Q4 FY25 growth at 7.6% appears to be tall ask, according to Madhavi Arora, lead economist at Emkay. The implied fourth quarter real GDP growth at 7.6%, with implied GVA growth of 6.8%, estimates a massive wedge between GDP and GVA growth, she said. It is unlikely that GDP growth will outdo GVA growth in Q4 by such a margin, given that net indirect tax growth will not shoot up during the quarter, according to her.

Gaura Sengupta, chief economist at IDFC First Bank also forecasts GDP growth to be closer to 6.8% in the fourth quarter. The improvement in companies' profit growth in Q3 was led by moderation in input cost pressures, rather than strong pick-up in sales, she explained.

High frequency indicators in the fourth quarter show continued improvement in growth momentum with rise in rural consumption and in central government capital expenditure. However, urban demand remains relatively subdued with slowdown in electronic payments (UPI, credit and debit card usage) and further slowdown in passenger vehicle growth, she added. 

So far, we only have data for high-frequency indicators for January, which looks like a mixed bag, said Aastha Gudwani, chief economist at Barclays. "Even if the magnitude of outperformance vs. the median that we saw in the October-December quarter, extends to the January-March quarter, we expect Q4 FY24-25 GDP growth at 6.7% year-on-year, translating into FY25 real GDP growth at 6.2%." 

Still, partly on account of upward revisions to past years, Arora estimates FY26 GDP growth at 6.5%, in line with the second advance estimates by the government. However, tepid private economic agents in the current cycle and global headwinds, could pressure growth, she cautioned.

Still Need For Policy Support?

The pick-up in core GDP, which excludes agriculture and public services, saw a more moderate improvement at 5.9% in the third quarter, compared to 5.6% in second quarter, indicating need for policy support, according to Sengupta.