Most reports suggest the growth rate for the three-month period may have slowed to about 6.5 per cent or even lower, something that could put the Narendra Modi government in a spot of bother. 

In the April-June quarter, India’s economy grew 6.7 per cent, lower than RBI's 7.1 per cent projection. However, it seemed the FY25 growth rate of 6.5 per cent to 7 per cent, as projected by the Economic Survey, would be within reach. 

A slowing growth rate would switch the focus on the central bank, which has retained the policy rate at 6.5 per cent. The repo rate — the rate at which banks borrow from RBI was last changed in February 2023. 

RBI Governor Shaktikanta Das has maintained that economic growth was on course. 

“Amid the rising headwinds and contradictions, our economy is sailing through smoothly, powered by buffers like strong macroeconomic fundamentals, a stable financial system and resilient external sector,” Das noted, while speaking at a CNBC event earlier this month. 

However, with a slowing growth rate, Finance Minister Nirmala Sitharaman and Commerce and Industry Minister Piyush Goyal have already called for lowering interest rates to push growth.

In its monetary policy committee (MPC) meeting in October, the Reserve Bank of India (RBI) had maintained the growth estimate of the current financial year at 7.2 per cent. The RBI estimated a growth rate of 7 per cent in the second quarter, while in the third and fourth quarters, it expected the economy to expand at 7.4 per cent.

“But with less than 7 per cent growth for two consecutive quarters, it will be a challenge for India to push GDP numbers as projected by the central bank,” an analyst told The Secretariat.

Although with about 6.5 per cent GDP growth rate for the July-September quarter, India would remain one of the fastest growing economies, the number will be a cause for concern. In 2023-24, India registered a growth rate of 8.2 per cent.

The manufacturing sector as measured by the S&P Global India Purchasing Managers’ Index (PMI) — a key measure of factory output — showed signs of slowing down in the second quarter. Demand for fast moving consumer goods (FMCG) and vehicles fell in the July-September period. Not just that, in September, India’s services sector grew at the slowest pace in a 10-month period. However, the readings for both manufacturing and services were well above the 50 mark reading on the PMI (Any reading below the 50 mark is considered contraction). 

Interestingly, former external members of the RBI’s MPC, Ashima Goyal and Jayanth R Varma, at their last MPC meeting in August, had opined that though overall growth was resilient, it remained below potential, advocating a reduction in policy rate or repo rate — the rate at which banks borrow from the RBI.

“There are some negative signals for Indian growth too. Early results of listed private manufacturing companies show sales and profits have softened in Q1 of FY25. Consumer confidence has fallen, and the business expectations index has been moderating since Q4 of FY24,” Goyal said in the MPC meet.

Das has been saying that the focus for the RBI was to ensure inflation was under control, even as India’s retail inflation based on the consumer price index (CPI) in October, had inched upwards to a 14-month high of 6.21 per cent, from 5.49 in September.

But now, with slowing growth rate, all eyes will be on the RBI, which will hold its next MPC meeting in December.