An Economic Times survey of 17 economists had projected a median Gross Domestic Product (GDP) growth of 6.5%, attributing the decline to muted urban demand, reduced government spending, and disruptions caused by heavy rains in mining and electricity sectors. A separate poll by Reuters also anticipated GDP growth at 6.5%, below the Reserve Bank of India’s (RBI) estimate of 7%.
Gross Value Added (GVA), a measure of economic activity, was forecast to expand at a slower 6.3% rate, compared to 6.8% in the previous quarter, signaling subdued momentum across sectors.
Key Contributors to the Slowdown
Economists had highlighted a combination of factors, including rising food inflation, higher borrowing costs, and stagnating real wage growth, which collectively dampened urban private consumption—a key driver contributing nearly 60% of India’s GDP. Retail food inflation, for instance, surged to 10.87% in October, significantly eroding purchasing power.
Corporate earnings also reflected economic headwinds, with leading Indian firms reporting their weakest quarterly performance in over four years for the July-September period. This downturn has raised concerns over a potential slowdown in investments and business expansion plans.
RBI’s Policy and Growth Outlook
Despite these challenges, the RBI has maintained its GDP growth forecast for FY25 at 7.2%, a drop from the previous fiscal year’s 8.2%. While the central bank has kept its repo rate unchanged at 6.50%, its policy stance has shifted to neutral, indicating caution amid persistent inflationary pressures.
Looking ahead, analysts remain cautiously optimistic about a potential economic rebound in the latter half of FY25. Factors such as increased state spending post-elections and improved rural demand following a favorable harvest are expected to provide some relief.