India’s economic growth likely slowed further

India's economic growth likely slowed further in the October-December quarter amid weakening demand and is set to lose more momentum as a series of interest rate hikes weigh on activity, according to a Reuters poll of economists.

Gross domestic product (GDP) growth in the last quarter slipped to an annual 4.6 per cent, according to the median forecast of 42 economists in the February 10-24 survey.

The economy had expanded 13.5 per cent in April-June -- boosted largely because of pandemic-related statistical distortions -- before moderating to 6.3 per cent in July-September.

The monthly survey also showed growth in Asia's third-largest economy was expected to slow further to 4.4 per cent in the current quarter, and across 2023/24 would average 6.0 per cent, lower than the 6.5 per cent official government estimate published on January 31.

Forecasts for the October-December data, due on February 28, ranged widely, from 4.0 per cent to 5.8 per cent. However, all survey respondents predicted growth to be lower than the previous quarter and three-quarters of respondents forecast growth below 5.0 per cent.

"There are base effects that are normalising and pulling down the annual numbers. The support from agriculture might be lower and also manufacturing could be a drag," said Sakshi Gupta, principal economist at HDFC Bank.

She added that on the demand side, exports and consumer demand were likely to have contributed to the slowdown, while investments held steady.

"Inflation is continuing to remain very high and interest rates are increasing. Pent-up demand has also started moderating," said Gupta.

The Reserve Bank of India has raised interest rates by a cumulative 250 basis points since last May to tackle inflation and is likely to do so again in April. Those past moves are expected to have a lagged effect on consumption and economic growth.

External demand is also likely to moderate as major central banks around the world continue raising rates.

"We expect growth for the domestic economy to hold up, but a greater-than-anticipated spillover impact from weak global conditions...may have more pronounced implications for domestic growth in the near term," noted Upasana Chachra, chief India economist at Morgan Stanley.