[1/3]Workers work at a construction site of the Ahmedabad-Mumbai bullet train corridor in Ahmedabad, India, May 31, 2023. REUTERS/Amit Dave/File Photo Acquire Rights
- Data due on Thursday at 1200 GMT
BENGALURU, Nov 27 (Reuters) – India’s economic growth likely weakened in the September quarter but remained strong, supported by robust services activity and solid urban demand, although a global slowdown dampened export growth, according to a Reuters poll of economists.
Gross domestic product (GDP) growth is expected to have slowed to 6.8% in the July-September quarter from 7.8% in the previous quarter, according to the median forecast of 55 economists surveyed November 17-27.
But forecasters see it as a slight slowdown from an exceptionally strong quarter for Asia’s third-largest economy, which the same group of economists expect to grow more than 6.0% in the coming years, currently the fastest among major economies .
Even as an erratic monsoon led to a rise in inflation last quarter, consumer demand – which contributes about 60% of GDP growth – remained strong in a country of over 1.4 billion people, driven largely by city dwellers.
Forecasts for data due on Thursday ranged from 5.6% to 7.4%.
“Overall growth is expected to have remained robust…utilities, services and construction recorded robust growth. Domestic demand remains the key economic driver of activity as external demand remains weak,” Rahul Bajoria of Barclays said in a note.
India’s GDP growth is expected to average 6.4% this fiscal year ending March 31 and 6.3% the year after, partly due to higher government capital spending, according to the broader Reuters survey.
This expected growth would significantly outpace most other economies, many of which have slowed dramatically after a historic series of interest rate hikes by central banks to curb inflation. In comparison, the Reserve Bank of India’s efforts have been mild.
Capital expenditure was 4.91 trillion Indian rupees ($58.98 billion) in the first six months of the fiscal year, up from 3.43 trillion rupees in the same period last year. Economists expect capital spending to rise even further ahead of national elections scheduled for May 2024.
When asked what the main driver of economic growth would be for the rest of this fiscal year, economists were almost split between government spending (14) and consumption (13). Five said investment.
But consumer demand is not uniform across the world’s most populous country, which is home to some of the world’s largest cities. Two thirds of Indians live outside cities.
While rural demand took a hit in the July-September quarter due to higher prices of everyday items, urban demand remained strong. However, the weakness in rural demand is likely to be short-lived.
A strong majority of 69% of economists who answered a separate question (20 out of 29) said the gap between rural and urban consumption will narrow in the next two to three years. Six said it would stay that way and three said it would expand further.
“We expect private consumption growth to continue to recover as it narrows the gap between rural and urban demand and between goods and services,” Upasana Chachra, chief India economist at Morgan Stanley, said in a note.
Chachra said improvement in purchasing power amid moderation in core inflation would boost rural consumption.
(For more stories from the Reuters Global Economic Survey:)
($1 = 83.2440 Indian rupees)
Reporting by Milounee Purohit and Devayani Sathyan; Survey by Sujith Pai and Susobhan Sarkar; Editing by Ross Finley and Jamie Freed
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