India's Annual GDP Growth Likely To Slow In September Quarter As Covid Effect Fades: Economists

India is expected to post annual growth of 6.2 per cent in the three months to September 31, a Reuters poll said, down from explosive growth of 13.5 per cent in the previous quarter

Ahead of gross domestic product (GDP) data which was due on Wednesday, economists opined that annual growth in the Indian economy likely slowed in the July-September quarter as Covid distortions faded, reported by Reuters. According to the news agency, the GDP data will provide clues about India’s resilience in the face of global economic turmoil.

India, Asia’s third-largest economy, is expected to post annual growth of 6.2 per cent in the three months to September 31, a Reuters poll said, down from explosive growth of 13.5 per cent in the previous quarter, which was inflated by comparison with weak activity during Covid-19 lockdowns.

The GDP data will cast light on the health of the economy as pandemic related disruptions ease and the government steps up spending in the hope that private spending and investments will follow, economists said.

"Several indicators suggest that the Indian economy is making resilient progress in Q2 FY23 in spite of the drag from global spill overs," State bank of India's economist Soumya Kanti Ghosh said, using the designation used by the government for the July-September quarter.

Ghosh, however, said annual GDP growth in the period could be slightly slower than the consensus expectation of over 6 per cent as companies have seen a decline in margins and industrial production increased at an annual pace of only 1.5 per cent on average last quarter, its weakest in two years.

Ministry of Statistics and Programme Implementation will release the GDP data on Wednesday.

During the September quarter, the government stepped up capital expenditure, spending Rs 1.67 lakh crore ($20.45 billion) over the three months, more than 40 per cent higher than a year ago.

Consumption has also improved, which suggests that momentum on a non-seasonally adjusted basis is likely to be stronger in the July-September quarter than in the previous three months, economists said.

"On a sequential (non seasonally adjusted) basis, July-September GDP is likely to increase, reversing the contraction seen in the prior three months," said Rahul Bajoria, chief India economist at Barclays.

The services sector, driven by pent-up post-Covid demand for hotels, restaurants and transport, will support growth, Bajoria said.

Dwindling exports due to a slowdown in global activity and higher interest rates may hurt economic activity in subsequent quarters, with the RBI now pegging GDP growth for the 12 months to March 31, 2023, at 7.2 per cent.