India's economy slowed much more than expected in July-September, expanding by only 5.4% year-on-year, data showed on Friday, weighed down by weak urban consumption following a rise in food prices.
The growth in gross domestic product INGDPQ=ECI was lower than the 6.5% expansion projected by a Reuters poll, and the central bank's estimate of 7%. It also eased from 6.7% seen in the previous quarter.
India is still, however, among the fastest growing major economies with government officials and several economists forecasting a potential regaining of momentum in the second half of the fiscal year, helped by improved rural demand after a strong monsoon and a better harvest and a pick-up in government spending.
The gross value added (GVA), a measure of economic activity saw a modest 5.6% growth, easing from a 6.8% increase in the previous quarter.
The Reserve Bank of India (RBI) has predicted GDP growth of 7.2%% for the fiscal year ending in March 2025, a forecast that some private economists have revised downward.
Agricultural output rose 3.5% year-on-year in July-September, up from 2% growth in the previous quarter, while manufacturing growth slipped to 2.2% from 7% in the previous quarter.
Economists said private consumption, accounting for 60% of GDP, has been hit by slower urban spending due to higher food inflation, high borrowing costs and weak real wage growth, despite a recovery in rural demand.
India's finance and trade ministers have called for interest rate cuts, though the central bank is expected to keep policy rates unchanged next week, according to Reuters poll of economists, amid inflationary concerns.
