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“Avoid job losses with targeted action to limit broader fallout. GST revenue loss will need to be balanced, as it is not a one-time cut. There is no reason to panic on the macros because of the US tariff hit,” JP Morgan added.
Bank of America economists Rahul Bajoria and Smriti Mehra cited weak mining output, subdued power demand, and slower manufacturing as factors weighing on the economy. Auto sales also slumped during the period, adding to the pressure. They flagged a likely gap between GDP and gross value added (GVA), another measure of economic activity. They noted that lower subsidies and higher taxes could weigh on GVA even as headline GDP growth holds up.
Mixed estimates from economists
According to a Reuters poll, GDP likely grew 6.7% year-on-year in April-June, slower than the 7.4% expansion seen in the previous quarter. Even at this pace, India remains one of the fastest-growing major economies.
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Nomura has projected growth at 6.9% for the quarter but expects momentum to fade in the coming months. The brokerage estimates that growth could fall below 6% in the second half of the fiscal year beginning October.
Nominal GDP growth expected to slow to 8%
JP Morgan said that, even as real GDP holds steady, nominal GDP growth—which factors in inflation—is expected to have slowed to 8% in April-June, compared with an average of nearly 11% in the past eight quarters.
Lower nominal growth, driven by multi-year low inflation, is likely to have weighed on government revenues and corporate earnings.
Data from the Reserve Bank of India showed that annual sales growth of 1,736 listed private manufacturing firms eased to 5.3% in the June quarter, down from 6.6% in the previous three months.
Economists flag risks from US tariffs, weak demand
The outlook has become more uncertain after Washington doubled tariffs on Indian goods to as high as 50% has become effective from Aug 28. Economists warn the move could hurt export-oriented and labour-intensive sectors such as textiles, footwear and jewellery.
“India faces headwinds from both the US tariffs and weaker global demand,” said Indranil Pan, chief economist at Yes Bank. He added that these pressures are likely to weigh on exports and job-creating sectors in the coming quarters.
RBI remains optimistic
Despite the risks, the Reserve Bank of India expects India’s full-year growth to stay close to 6.5%. Governor Sanjay Malhotra recently said that higher tariffs will have only a “minimal impact” on overall economic performance.
Economists believe a good monsoon, strong government spending, easing food inflation and front-loaded U.S. shipments likely supported growth in the April-June quarter, offsetting weak urban demand and slow private investment.