India’s economic recovery likely strengthened in the previous quarter, boosted by services activity that recovered after pandemic-related mobility restrictions were eased, a Reuters poll of economists found.
The Nov. 22-25 poll of 44 economists put the median year-on-year growth forecast at 8.4% in the July-September period. The Indian economy expanded 1.6% and 20.1% in the Jan-March and April-June quarters, respectively.
The report will be released at 5:30 pm on November 30.
“After lagging the recovery during the initial phases, Q3 saw services activity playing catch up. Relative control over new infections, and a large increase in vaccination helped improve services activity,” wrote Rahul Bajoria, chief India economist at Barclays.
“While supply shortages weighed on manufacturing, the services recovery scaled greater highs during the past quarter.”
Respondents noted those estimates, as with the prior quarter’s numbers, were flattered by a comparison with a weak performance one year ago.
The latest 8.4% growth projection was an upgrade from 7.8% predicted in a Reuters poll taken last month. The Reserve Bank of India has pegged growth for the same period at 7.9%. But forecasts in the latest Reuters poll were wide, in a 6.2%-13.0% range.
“It is a rough road ahead for the economic recovery, we believe the recovery is more mechanical in nature, with a sustained growth driver yet to emerge,” wrote Kunal Kundu, India economist at Societe Generale, in a note to clients.
“It has been worsened by a lack of appropriate employment and income support given the paltry fiscal response to the coronavirus.”
That did not deter some economists from saying a reverse repo rate hike in December was now likely.
“The RBI needs to progressively provide more weight to inflation, and particularly elevated core inflation as growth normalises while being able to respond with tightening measures depending on the evolution of domestic and global factors,” said Abhishek Upadhyay, senior economist at ICICI Securities Primary Dealership.
“We expect the economic recovery to be stronger than consensus and the RBI’s forecast, even with some downside risks.”