Strong GDP Print Knocks Back Market Hopes of RBI Rate Cut

India’s GDP growth hit a six-quarter high of 8.2% in the July–September quarter, beating market estimates and the Reserve Bank of India’s projection by a handsome margin. GDP had grown 7.8% in the preceding quarter, while the average market poll had pegged second-quarter growth at 7.4%. The RBI had projected growth of 7% for the period.



The stronger-than-expected print puts the spotlight on the central bank’s interest-rate decision next week. With inflation running below the 4%, there is space to cut rates, as the RBI itself noted in the last policy, but with growth showing strong momentum, the question is whether the central bank needs to.

Bond markets reacted immediately to the release, with the 10-year government security yield rising nearly 5 basis points to 6.55%, reflecting expectations of a more cautious pace of policy adjustment.

The Monetary Policy Committee is scheduled to meet next week.

The MPC though may ponder over a benign nominal GDP growth of 8.7%, down from 8.8% in the preceding three months.

Manufacturing grew 9.1% in July–September, construction 7.2%, and agriculture 3.5%.

For the half year of the financial year, real GDP growth came at 8%, up from 6.1% in the corresponding period a year ago.

Real GVA grew at 8.1% in July-September, up from 7.6% in the preceding quarter