This time in the quarter from July to September, the country’s economic growth is expected to be better than before. According to available information, in a recent poll by Moneycontrol, 11 economists have estimated that India’s GDP has grown at the rate of about 7.3% in the second quarter. Let us tell you that this estimate is slightly higher than the Reserve Bank’s estimate of 7%, which shows positive signs in the economic environment.
If we look at the entire financial year, experts are assuming an average growth rate of 6.9%. According to many economists, this pace may slow down a bit in the second half, but the performance of the first two quarters has been better than expectations.
Aadhaar effect, rural reforms and impact of festivals
Experts say that the biggest reasons for the rise in this quarter are last year’s low base rate, good rains, better demand in rural areas and pre-festival shopping.
According to DBS Bank economist Radhika Rao, real income has increased due to government spending, rural consumption and low inflation, which has supported the growth rate. He estimates that this quarter may show a rate of around 7.5%.
He also said that the full impact of the cut in GST rates will be clearly visible in the third quarter because these changes have come into effect at the end of September. Similarly, Barclays Chief Economist Aastha Gudhwani says that good rains and better Kharif sowing have strengthened the economy, although she is cautious about continuing this growth in demand in the future.
Expectation of softening of inflation and rate cut
It is noteworthy that in October, consumer inflation (CPI) fell to its lowest level in several months, after which experts have reduced the average inflation estimate for the entire financial year to 2.1%.
80% of the economists included in the poll believe that RBI can cut interest rates by 25 basis points in the December policy. This step can be taken with the aim of encouraging weak inflation and demand.According to Aditi Nair, Chief Economist of ICRA, due to changes in GST and no big jump in food prices, inflation can remain under control, paving the way for rate cuts.
Rural areas strong, urban signals mixed
Gaura Sengupta of IDFC First Bank says that signs like increase in two-wheeler and tractor sales in rural areas, increase in wages and decline in demand for MNREGA point towards improvement. However, in urban areas, there is a decline in passenger vehicle sales and a slowdown in tax collection, which may limit growth to some extent.
According to Rajni Sinha of CareAge Ratings, the government’s huge capital investment in construction and manufacturing has shown good results, but US tax hike and fiscal tightening may bring some pressure in the second half of the year. Ind-Ra’s Paras Jasri has warned that the weak pace of nominal GDP could challenge the government’s financial calculations.
Yuvika Oberoi of Quantico believes that the impact of GST cut and government capital expenditure will strengthen growth in the third quarter. At the same time, Abhishek Upadhyay of ICICI Securities says that the impact of increasing debt, low salary growth and low savings can be seen on urban consumption.
Economists also say that if India-US tariff talks turn out to be positive, exports may increase and FY26 growth may be closer to 7%.
