India's GDP to grow faster than expected at 6.7%: Poll
What's the story
The Indian economy is expected to grow at a slightly faster pace than earlier predictions, according to a Reuters poll. The median forecast of over 40 economists puts the growth rate at 6.7% for the current fiscal year. This is an increase from last month's estimate of 6.6% and a significant rise from August's projection of 6.3%. The revision comes after an unexpected 7.8% growth in the April-June quarter and a recent cut in GST aimed at boosting consumer demand.
Rate expectations
Interest rate cuts expected in December
While the US's 50% tariff on Indian goods is still in place, there is optimism for a reduction. A majority of economists (68%) in the poll expect the Reserve Bank of India (RBI) to cut interest rates by 25 basis points in December. This comes after the central bank held the repo rate at 5.5% earlier this month and indicated that cooling inflation has created room for growth-supportive policies.
Future outlook
Inflation forecast and rural economy performance
The poll also predicts an average inflation rate of 2.5% for this fiscal year, rising to 4.2% next year. Sakshi Gupta, principal economist at HDFC Bank, said the revision in GDP growth numbers is due to "monetary and fiscal policy support for growth" and the rural economy's performance. All but one of the 21 economists who answered an additional question in the poll said they expect faster-than-expected economic growth over the coming year.
Investment concerns
Concerns about private investment revival
While recent tax cuts could provide some relief to Indian households, there are still concerns about their sufficiency in reviving private investment. This is crucial for generating jobs for millions joining the workforce annually. Kanika Pasricha, chief economic adviser at Union Bank of India, said uncertainty often impacts investments the most within the GDP spectrum. She added that once this uncertainty fades away, private investments could also see a comeback.