India's Economic Growth Slows; Signs of Recovery Emerge

India's GDP growth, at a disappointing 5.4% in the July-September quarter, is expected to slow to 6.8% for the fiscal year, according to Crisil. Despite low growth due to high interest rates and fiscal policy, indicators hint at a recovery in the third quarter.

India's economic growth has shown signs of stalling, with GDP increasing by just 5.4% in the July-September quarter of the 2024-25 fiscal year, as per official data from the Ministry of Statistics and Programme Implementation. Crisil, the rating agency, now forecasts a slower growth rate of 6.8% for the year, citing high interest rates and low fiscal stimulus as primary hindrances.

The Crisil report suggests that the risks remain on the downside, pointing to the subdued growth figures in the second quarter. However, signs of revival appear in high-frequency indicators such as automobile sales and exports, observed in October, signaling potential recovery in the third quarter. This suggests that the second-quarter slowdown could be a temporary phase.

Moreover, agricultural growth is on the rise, benefiting from a promising kharif harvest backed by favorable monsoon conditions and strong reservoir levels. This upswing is likely to enhance rural consumption and ease food inflation pressures. Retail inflation remains a concern, as it stood at 6.21% in October, exceeding the Reserve Bank of India's target. Policymakers are striving to curb inflation and sustain economic momentum into the latter half of the fiscal year.

(With inputs from agencies.)