Unified Payments Interface (UPI) transactions averaged Rs 22.8 lakh crore per month in the third quarter, up from Rs 20.6 lakh crore in the second quarter, according to data from the National Payments Corporation of India (NPCI).
New Delhi: Economic growth may have accelerated after the slowdown in the September quarter, with business activity showing signs of improvement in the third quarter, economists said. However, growth is expected to remain subdued this year, they added, taking it below FY24’s 8.2%.
The government will publish the first preliminary estimates of gross domestic product (GDP) for fiscal year 25 on Tuesday. India’s GDP grew at a seven-quarter low of 5.4% in July-September, leading to a wave of corrections in FY25 estimates. Gross Value Added (GVA) growth also slowed to 5.6% in the September quarter, compared to 6.8% in the previous three months.
“While overall economic activity lost momentum in the second quarter, especially in August and September, most high-frequency indicators suggest growth has bottomed out,” said Aastha Gudwani, chief India economist at Barclays. Bank of Baroda Chief Economist Madan Sabnavis echoed the optimism and suggested that the indicators should be viewed on a cumulative basis; this indicates an upward movement.
Unified Payments Interface (UPI) transactions averaged Rs 22.8 lakh crore per month in the third quarter, up from Rs 20.6 lakh crore in the second quarter, according to data from the National Payments Corporation of India (NPCI).
Similarly, Goods and Services Tax (GST) collections rose to an average of Rs 1.82 lakh crore per month in October-December, compared to Rs 1.77 lakh crore in July-September. Government spending also improved in the third quarter, after a slump in the first half of FY25 due to the general elections.
“The infrastructure segment is showing a modest pace of activity, with government capital expenditure expected to pick up,” said Paras Jasrai, senior analyst at India Ratings and Research, which expects GDP growth of 6.5% in the third quarter.
However, according to data from HSBC, the manufacturing Purchasing Managers’ Index (PMI) fell to a 12-month low of 56.4. The average value in the third quarter was 56.8, down from 57.4 in the previous quarter.
Barclays GDP Growth Report
Barclays expects GDP and gross value added growth to improve by at least one percentage point in the third quarter compared to the second quarter. While a revival in economic activity is expected, economists warn that GDP growth will fall short of the Reserve Bank of India’s (RBI) FY25 forecast of 6.6%. The Indian economy grew by 8.2% in FY24.
“The degree of improvement in Q3 will not push GDP growth to 7% in the second half of the year,” said Sakshi Gupta, chief economist at HDFC Bank.
Gaura Sengupta, chief economist at IDFC First Bank, said: “It is difficult to see growth momentum picking up to an extent that will offset the dip in the second quarter.”
Demand for work under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) rose 8.3% year-on-year to 21.6 million in December, indicating people may be looking for work as other options tighten.
“There is no visible improvement yet in rural areas, while urban growth is certainly slowing down due to weakening urban wage growth,” Sengupta said. Three policy factors – fiscal, monetary and credit impulse – are exerting a moderating influence on growth, she added.
HDFC Bank expects growth of 6.4% for the fiscal 2024-25, while Bank of Baroda estimates it at 6.5-7%.
“Although the indicators show a mixed result, there is some improvement compared to the second quarter,” said Gupta. “The second half of the year will probably be a little better than the first half.”
