India's GDP Growth To Ease In Current And Next Fiscal Year: Poll

India's economic growth surged in the three months ending December, surpassing most estimates. This was primarily driven by a significant reduction in critical subsidies that bolstered GDP

India is likely to experience a mild slowdown in its rapidly expanding economy, according to a poll of economists by Reuters. Despite growing 8.2 per cent in the last fiscal year, the fastest among major economies in Asia, growth is anticipated to decelerate to 7.0 per cent in the current fiscal year and further to 6.7 per cent in the following fiscal year, as reported in a June 19-27 Reuters survey involving over 50 economists.

The forecasts have remained essentially unchanged from those issued before the election, after which Prime Minister Narendra Modi has entered his historic third term.

Despite forming a government with support from regional parties, the BJP maintained continuity by retaining most ministers, indicating no immediate alteration in policy direction. This policy has long focused on bolstering gross domestic product (GDP) growth through government capital expenditure.

However, the absence of a corresponding increase in private sector investment has resulted in a significant portion of the Indian population, especially the youth, either unemployed or engaged in low-wage jobs. With economists foreseeing no imminent policy overhaul, they have maintained their previous forecasts without revision.

"With a reduced majority now, I don't expect any major growth-enhancing reforms whatsoever over the next five years. The reality is (that) consumption is weak. It's just going to surface more in the GDP numbers because the lift from statistical discrepancies is fading,” Miguel Chanco, chief emerging Asia economist at Pantheon Macroeconomics, told Reuters.

India's economic growth surged in the three months ending December, surpassing most estimates. This was primarily driven by a significant reduction in critical subsidies that bolstered GDP. Economists polled suggest that such a scenario is unlikely to repeat.

The latest poll forecasts a median growth rate of 7.0 per cent for this fiscal year, slightly lower than the Reserve Bank of India's (RBI) own projection of 7.2 per cent, which Governor Shaktikanta Das indicated could strengthen further in the upcoming months.

"Growth is switching to a lower gear but will remain close to potential. I have baked in a modest private capex cycle pickup, not perhaps as strong as the RBI is factoring. And consumption (will) perform better, but I don't think it will become a growth driver," said Dhiraj Nim, an economist at ANZ, in the report.

The majority of economists anticipate that the government will adhere to a general course of fiscal consolidation. However, they anticipate that the government will allocate a more significant portion of the substantial dividend transfer received from the RBI last month towards increased spending in a budget expected to be presented in late July.