India Economic Forecast

After growing 6.1% in January–March, GDP surged 7.8% year on year in April–June 2023 (Q1 FY 2023). Consumers hiked their spending more than in the prior quarter as inflation fell and confidence in the economy rose. Economic growth is projected by our panelists to cool slightly in July–September but remain among the strongest in Asia. Services activity rose the most in 13 years in July compared to the prior month but then increased slightly less sharply the following month, likely due to a recent uptick in inflation and a loss of agricultural income following the driest August in 120 years. In other news, analysts widely labeled the recent G20 summit held in New Delhi as a victory for India, cementing its role as a rising power by getting G20 leaders to agree on a joint declaration despite divisions between the West and Russia.

Inflation eased to 6.8% in August from 7.4% in July, as vegetable prices normalized after spiking in July. Looking ahead, our panelists expect inflation to return to the Central Bank’s 2.0–6.0% target range by the end of this calendar year and then trend down to somewhat above the midpoint of the target range in FY 2024 as weather conditions normalize.