BENGALURU (Reuters) – India’s economy slowed much more than expected in July-September, expanding by only 5.4% year-on-year, data showed on Friday, weighed down by weak urban consumption following a rise in food prices.

A Reuters poll had predicted a 6.5% expansion in gross domestic product for the quarter ending Sept. 30.

COMMENTARY

ADITI NAYAR, ECONOMIST AT ICRA, GURUGRAM

In light of the recent spike in CPI inflation, we anticipate a status quo from the RBI’s monetary policy meeting next week.

However, with the GDP growth sharply undershooting the Committee’s expectations, a February 2025 rate cut may be on the table if the next two inflation prints recede.

GAURA SEN GUPTA, INDIA ECONOMIST AT IDFC FIRST BANK, MUMBAI

This (GDP print) reflects a sharp slowdown in listed company profits in the second quarter. From the expenditure side, capex growth slowed, reflecting a slowdown in government capex especially state government.

Private capex has remained muted due to lack of visibility on consumption demand. Private consumption growth slowdown is led by urban demand weakness as income growth slowed.

Post today’s print, there is a high probability of an RBI rate cut in December.

VIVEK KUMAR, ECONOMIST, QUANTECO RESEARCH, MUMBAI

Some of the downdraft will fade away in H2 FY25 as the favourable impact of healthy kharif sowing comes on board, while the government steps up its expenditure in an attempt to get close to the budgeted target. This, along with the festive season revival in activity levels, should help in GDP growth turning higher.

Having said that, global uncertainty is likely to worsen in the Trump 2.0 regime, the cascading effect of which needs to be monitored closely. Overall, we now see a credible downside risk to our FY25 GDP growth estimate of 7.0%.

UPASNA BHARDWAJ, CHIEF ECONOMIST KOTAK MAHINDRA BANK, MUMBAI

The sharply lower-than-expected GDP figures reflect the highly disappointing corporate earnings data. The manufacturing sector appears to have taken the maximum beating.

The high-frequency data suggests festive-linked revival in activity may provide a marginally better second-half growth but overall GDP growth for the full year is going to be around 100bps lower than RBI’s estimate of 7.2%.

Despite the sharp slowdown in GDP growth, we maintain our view of a pause by the RBI next week, given elevated inflation and uncertain global environment.

SAKSHI GUPTA, PRINCIPAL ECONOMIST, HDFC BANK, GURUGRAM

The softer economic growth stemmed from lower manufacturing, electricity and mining growth in the second quarter.

On the demand side, consumption growth slowed probably due to a moderation in urban demand.

While we expect the RBI to keep the policy rate unchanged at its meeting next week, the possibility of a move in February for a rate cut has increased.

GARIMA KAPOOR, ECONOMIST, INSTITUTIONAL EQUITIES, ELARA SECURITIES, MUMBAI

Amid sluggish consumption growth owing to moderating real income growth and effect of concentrated and heavy rains, demand drivers remained weak in Q2 FY25. The rise in commodity prices amid sluggish top-line growth led to drop in gross value added growth in manufacturing sector.

Both these factors impacted the growth in Q2FY25.

(Reporting by Hritam Mukherjee, Dimpal Gulwani, Nishit Navin in Bengaluru; Compiled by Indranil Sarkar; Editing by Krishna Chandra Eluri)

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