(Reuters) – India’s economic growth is expected to pick up in the current quarter after a slowdown in July-September, the country’s central bank said in its monthly bulletin on Wednesday, citing a rebound in private consumption in the festive period.
The Reserve Bank of India (RBI) projected third-quarter gross domestic product growth at 7.6%, faster than an estimated 6.7% in the second quarter.
“In India, the slack in speed observed in the second quarter of 2024-25 is behind us as private consumption is back to being the driver of domestic demand with festival spending lighting up real activity in Q3,” the RBI said in its bulletin for November.
Despite the optimistic growth forecast, the RBI expressed concern about rising core inflation.
Earlier this month, Asia’s third-largest economy reported its highest retail inflation in 14 months, driven by soaring food prices.
The annual retail inflation of 6.2% in October breached the central bank’s tolerance band of 2%-6% for the first time in more than a year.
Private consumption had taken a hit in the second quarter of the fiscal year, hurt by heavier-than-usual rains. That led to top Indian firms marking their worst quarterly showing in more than four years.
Still, a rebound in private consumption during the festival period of October and November, has led the RBI to maintain its bullish stance on medium term growth.
Indians generally consider the festival period an auspicious time to make big ticket purchases, from cars to costly electronics.
The central bank also expects rural demand to grow on the back of a likely record production of summer crop grains and “promising” prospects for the winter crop, which could boost farm incomes.
(Reporting by Nandan Mandayam in Bengaluru; Editing by Tasim Zahid)
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