India’s Economy Likely Expanded 7.3% In September Quarter; Private Capex Remains Subdued

India’s economy likely expanded 7.3% in the September quarter, driven by strong rural activity and government expenditure, according to analysts. Private capital expenditure, however, remains muted. Household consumption — nearly 60% of the economy — is expected to have strengthened compared to the previous quarter on improved agricultural output.

India remains one of Asia’s fastest-growing major economies even as US reciprocal tariffs stand at 50%. The projected reading, though, marks a moderation from the higher-than-expected 7.8% print in the June quarter. Estimates from economists polled by Reuters range between 6.0% and 8.5%. The official GDP data is due Friday.

A low deflator also lifted the latest projections. “GDP will benefit from a lower base and an exceptionally low deflator, which will artificially prop up real GDP growth … But nominal GDP growth will likely continue to be weak,” Reuters cited Kaushik Das, India chief economist at Deutsche Bank, as saying. Consumer inflation averaged near 2% in July–September.

Gross Value Added (GVA) is expected to have expanded 7.15%, while nominal GDP growth likely slowed to 8.3% from 8.8% in the previous quarter, the poll showed.

RBI Bulletin Points to Firming Growth Momentum in October

High-frequency indicators suggest this momentum may have extended into the next quarter. India’s domestic economic resilience strengthened in October, supported by festive spending, firmer urban consumption and continued rural demand, the Reserve Bank of India said in its November Bulletin. The cuts in goods and services tax (GST) that came into effect on September 22 also aided demand.

“The Indian economy showed signs of a further pick-up in momentum, despite lingering external headwinds. Demand conditions exhibited signs of improvement with the revival of urban demand and continued strength in rural demand,” the RBI said.

RBI’s Malhotra Signals Scope for Further Rate Cuts

The improving demand backdrop comes as the central bank signals additional policy easing. RBI Governor Sanjay Malhotra said in an interview with ZEE Business on Monday that “there is room to cut policy rates,” reiterating the guidance given at the October MPC meeting. Incoming inflation readings and economic data “have maintained the space for cuts,” he said.

Whether the MPC acts in December will depend on the committee, he added. The panel has already delivered 100 bps in cumulative rate cuts in 2025, bringing the repo rate to 5.5%. The MPC meets from December 3–5. While most market participants expect another 25 bps cut, overnight indexed swap rates are signalling a status quo, Reuters reported.