MUMBAI: A Post-Festival Economic Moderation

Recent economic reports suggest a moderation in growth following the festival season, potentially leading to lower-than-expected growth in the third quarter. Despite a spike in economic activity in October, a noticeable slowdown was observed in November, as indicated by various economic indicators.

Key Economic Indicators Reflect Slowing Momentum

Kaushik Das, an economist with Deutsche Bank, highlighted that GST growth in December 2024 was only 7.3% year-on-year, marking the fourth consecutive month of single-digit growth. The Manufacturing PMI for the same period reached a 12-month low at 56.4. Although core infrastructure production growth improved slightly in November, it remained below the 5% mark.

Looking Ahead: Monetary Policy and Growth Projections

Das emphasized the need for a positive shock to counteract the slowdown and for monetary policy to be forward-looking. He estimates India's real GDP growth to average about 6.5% YoY in FY25 and FY26, supported by policy measures, yet still below the economy's potential growth rate of 7-7.5%.

Divergent Trends in Economic Indicators

A report by Motilal Oswal points out divergent trends in November and December 2024, suggesting an uneven growth trajectory. The Economic Activity Index-to-GDP saw its first decline in 28 months, with the contraction attributed to a sharp decrease in external trade.

Rahul Bajoria from Bank of America Global Research noted that while November was the best month for the Indian economy in FY24-25, some moderation is already visible in December.