Base Effect To Help Lift India’s GDP Growth To Double-digits In April-June: Reuters Poll

India’s economy is forecast to have expanded by an annual 15.2% in the April-June quarter, thanks to a weak base last year and a rebound in consumption as pandemic restrictions eased, a Reuters poll found.

That expected strong double-digit growth rate in Asia’s third-largest economy, based on the median forecast from an Aug. 22-26 Reuters poll of 51 economists, would be up sharply from a reported 4.1% growth rate in the preceding quarter.

If realised, growth would be the fastest in a year, but slightly weaker than the Reserve Bank of India’s forecast of 16.2%. The data will be released at 1200 GMT on Aug. 31.

Forecasts ranged widely, from 9.0% to 21.5%. But most economists said any blowout growth figure would be mostly down to it coming off a low base caused by the impact of the COVID-19 delta variant on economic activity.

“If we go back 12 months ago, the impact in the delta wave back then was quite severe on growth. So it is mostly a base effect story and I think a lot of forecasters are underestimating how strong this statistical lift is going to be,” said Miguel Chanco, chief emerging Asia economist at Pantheon Macroeconomics.

“Festival-led consumption combined with traction gained from economic reopening supported growth in the second quarter, but my hunch is that going forward, the support could wane.”

The Reuters poll also expects the economy to slow considerably to 6.2%, 4.5% and 4.2% in the current and following quarters, highlighting a below-potential growth trajectory for the second-most populous country in the world.

When China and the rest of the world are grappling with economic challenges, India stands out as one of the better performing economies. Still, it has not created enough jobs to keep up with the large numbers of young people entering the work force.

“This high growth is not at all sustainable,” said Kunal Kundu, India economist at Societe Generale.

“I don’t think India is growing at double digits…do not get fooled by statistics. Don’t just look at the number and this plus 15% (growth figure) is not the real thing. We need a lot more jobs and inclusive growth.”