Indian economic growth is expected to see a pick-up in the third quarter of the financial year, after falling to a seven-quarter low.

The gross domestic product is estimated to grow by 6.2% in the October–December period, according to economists polled by Bloomberg. That’s compared to 5.4% in the previous quarter. Gross value added is forecasted to increase by 6.2%.

For the full year, GDP is expected to grow 6.3% in the fiscal 2024-25, compared to a growth of 8.2% in the preceding fiscal. This will be the lowest in four years. The first advance estimates by the government pegged GDP growth at 6.4%.

India’s economic performance in the third quarter benefitted from a sharp ramp-up in aggregate government spending on capital and revenue expenditure, high growth in services exports, a turnaround in merchandise exports, healthy output of major kharif crops, etc., which would have buffered rural sentiment, Aditi Nayar, chief economist at ICRA, said. Some consumer-focussed sectors saw a pick-up during the festive season, even as urban consumer sentiment dipped slightly, and other sectors such as mining and electricity saw an improvement after weather-related challenges in the previous quarter, she explained.

Growth momentum is expected to improve during the October-December period, led by a revival in rural demand and a rise in central government capital expenditure, said Gaura Sengupta, chief economist at IDFC First Bank. Urban demand is also showing some signs of improvement, but the recovery remains relatively softer than rural demand, said Sengupta, who expects GDP to grow by 6% in the third quarter and GVA to grow by 6.2%.

ICRA estimates that the growth in net indirect taxes in nominal terms eased significantly to low single digits in the quarter from 7.9% in the second quarter of the ongoing fiscal, owing to a sharp base effect-led rise in the annual increase in subsidy disbursement by the Centre. As a result, the GDP expansion would likely continue to trail that in the GVA in the three months ended December for the third quarter in a row, with a similar trend expected in the full year as well, Nayar, who forecasts GDP to grow by 6.4% and GVA to grow by 6.6%, said.

Key Sectors

Industry-wise, the improvement is led by industry and agriculture, while services growth is expected to moderate.

Agriculture sector is expected to improve on account of higher growth than was initially anticipated, Jahnavi Prabhakar, economist at Bank of Baroda said, adding that even for the next quarter improvement is expected in the agriculture growth given robust rabi acreage.

The industrial sector, which is estimated to grow by 5.9% growth in Q3FY25 on an annual basis, according to estimates by Bank of Baroda. This is partly attributable to a higher base effect amidst still slow growth as reflected in IIP, Prabhakar said. This deceleration is also on account of moderation noted in corporate earnings, particularly for the crude oil, steel, and auto sectors. However, higher profit margins of firms were visible in the corporate performance of certain industries.

For services, despite a festive surge some moderation is evident, said Prabhakar, estimating growth at 6.9% for the quarter on an annual basis. Lower GST collection in this period is also expected to slow the growth rate. On the other hand, experience economy is expected to boost trade and hospitality sector, Prabhakar said, adding that lower growth in both deposit and credit growth relative to last year will bring the financial sector growth lower.

. Read more on Economy & Finance by NDTV Profit.India’s gross domestic product is estimated to grow by 6.2% in the October–December period, according to economists polled by Bloomberg.  Read MoreEconomy & Finance 

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