India's economy seen growing at slower pace in March quarter

India's economy is expected to have grown at a slower pace in the January-March quarter than the previous three months, dampened by a moderation in manufacturing and urban spending, but economists see economic momentum remaining strong in Asia's third-largest economy.

The median forecast from a survey of 54 economists put GDP growth at 6.7 per cent year-on-year for the three months, the fourth quarter of India's 2023/24 fiscal year, lower than the higher- than-expected 8.4 per cent expansion in the previous quarter.

In the October-December quarter, growth was boosted by a sharp fall in subsidies, while gross value added (GVA), seen by economists as a more stable measure of growth, rose 6.5 per cent.

• Also read: GDP growth to dip to four-quarter low of 6.7% in Q4’23-24: ICRA

In the March quarter, GVA growth is seen at 6.2 per cent.

Driven by an increase in state infrastructure spending and strong urban demand, the economy has shown remarkable strength in the face of global headwinds. The central bank expects the economy to grow by close to 8 per cent this fiscal year, which would be the highest among large economies globally.

The GDP figures will be released on Friday at 1200 GMT.

"Sustained momentum in domestic demand is likely to have underpinned the stellar performance of the economy," said Ankita Amajuri, economist at Capital Economics, which expects 7.5 per cent growth in March quarter.

• Also read: GDP growth likely to be 6.7% in Q4, around 7% in FY24: Ind-RA

High-frequency indicators data for April including auto sales, housing loans and fuel consumption reflected strong urban demand, though there were concerns about weak rural demand despite forecasts of a normal monsoon this year.

On Wednesday, S&P Global Ratings raised its sovereign rating outlook for India to "positive" from "stable", adding that regardless of the outcome of national elections it expected broad continuity in economic reforms and fiscal policies.

It expects the economy to grow at 6.8 per cent in the current fiscal year starting April, and close to 7 per cent annually over the next three years.

India's marathon national election is in its final stage with votes scheduled to be counted on June 4, and investors are gearing up for Prime Minister Narendra Modi securing a third term in office.

India is among the world's fastest-growing economies but growth is below what is needed to create jobs in the economy, some economists say.

Raghuram Rajan, former governor of the Reserve Bank of India, has said India's economy needs to grow by around 9-10 per cent annually for next couple of decades to create good jobs for millions of educated young people and achieve the target of becoming a developed country by 2047.