India's Economic Growth: Under Pressure from Weak Consumption

India's economy grew by only 5.4% in July-September, below the expected 6.5%. The weak urban consumption, due to rising food prices, led to subdued growth. As inflation soared, the RBI is unlikely to cut interest rates soon, despite potential easing in April if inflation retreats.

India's economic expansion slowed significantly in the July-September quarter, registering a growth of 5.4% year-on-year, as reported on Friday. Weak urban consumption, exacerbated by climbing food prices, took a toll on economic performance, falling short of the forecasted 6.5% growth by a Reuters poll.

The decline in urban sector income has impacted consumption, with demand weakening for both durable and non-durable goods over the past few months, reflecting in various companies' earnings. Public sector contribution was minimal early in the fiscal year but a recent surge in spending offers hope for stronger GDP growth in the second half of FY25.

Economists suggest caution, predicting subdued growth due to moderated household consumption and easing investment growth amidst high interest rates. While a rate cut seems unlikely in December due to inflation concerns, April may open the door for monetary easing if inflation stabilizes.

(With inputs from agencies.)