India’s real GDP grew 7.8%YoY in the June quarter, vs 6.1% in the previous quarter, partly on improved economic momentum on the ground and partly on a favorable base effect. On a seasonally-adjusted (SA) sequential basis, India’s real GDP was up 2.6%QoQ (SA) compared with 1.3% QoQ in the previous quarter.
Today's print was in line with consensus expectations 7.8% but below our expectation of 8%. Nominal GDP growth was up a modest 8%YoY (from +10.4% in the March quarter) on tepid GDP deflator.”
We expect inflation to overshoot RBI’s forecast of 6.2% for the September quarter by c50bp. We now expect CPI inflation to average 5.6%YoY in FY24 (5.4% previously).
Even as the government has been taking proactive supply side measures (including food supply management, lowering of cooking gas prices and a possible retail fuel price cut in the Dec quarter), weather uncertainties (resulting in monsoons entering an extended dry phase with August rainfall being 36% below normal which could affect not only summer crop yields but also winter crop sowing) and the possibility of a pick-up in populist spending ahead of a tight election calendar in H2 could lead to risks of a more generalised rise in food inflation that can spill over into core inflation.
We continue to expect MPC to remain vigilant on inflation and keep the repo rate on a prolonged pause for the rest of FY24.
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