India’s Q1 GDP growth may have slowed to 6.85%, shows Mint poll

India's economic growth may have slowed to 6.85% in April-June from 7.76% in the previous quarter, according to a median estimate from 25 economists polled by Mint. The slowdown is attributed to a lack of economic momentum during the general elections, muted government capital expenditure, and an uneven monsoon.

The GDP data for the first quarter of the current financial year is scheduled to be released on 30 August.

If these projections hold, it would mark the lowest GDP growth in five quarters. Economists have projected GDP growth in the range of 6.0-7.3% for the quarter.

"The weakness was likely on account of elections which took a toll on both government spending and made the private sector cautious in their spending programs," said Sujan Hajra, chief economist at Anand Rathi Group. Besides these factors, extreme heat waves may have also impacted productivity during the quarter.

In FY24, India's GDP growth benefited from a low deflator and reduced subsidy outgo, resulting in an 8.15% growth. Lower subsidies led to higher net taxes, widening the gap between GDP and gross value added (GVA). GDP is calculated by adding net tax (taxes minus subsidies) to GVA. However, this disparity may have normalized in April-June.

"The gap between the GDP and the GVA growth is likely to moderate to 30 basis points from 148 bps in the previous quarter mainly on the account of a turnaround in the subsidy outgo of the government," said Aditi Nayar, chief economist, at rating agency Icra. One percentage point is equal to 100 basis points.

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Sector-wise, agricultural activity, which was weak in FY24, is expected to show improvement since the last quarter, although the uneven monsoon may still impact outcomes. A subdued performance by India Inc. during the quarter may have weighed on manufacturing growth. Additionally, slower government spending and weak consumption likely dragged down growth in the services sector, according to a note from Union Bank dated 26 August.

Despite the sharp slowdown in Q1, India remains the fastest-growing major economy globally, a point of significance as the US, the world's largest economy, faces the risk of recession.