India To Hold Top Spot For Economic Growth But Risks Remain: Report

India will be the fastest-growing major economy this fiscal year, supported by government spending ahead of May's general election, according to a Reuters poll of economists who did say the forecast risks were skewed to the downside.

While Narendra Modi's government increased spending in the past few years to build roads, railways, and other infrastructure, helping India defy the global slowdown trend, it has so far failed to create enough jobs.

Asia's third-largest economy will grow 6.2 per cent in the fiscal year ending in March 2024 and 6.3 per cent next, the same as predicted last month, according to the median forecasts in the 20-26 September poll of 65 economists.

Forecasts for this fiscal year ranged widely from 4.6 to 7.1 per cent.

But most economists said expected growth was still well below potential and a drier than normal monsoon season so far could act as a restraint in an economy where agriculture employs about half the workforce in a country of over 1.4 billion people.

After a stellar 7.8 per cent expansion last quarter, economic growth was expected to moderate to 6.4 per cent this quarter and then drop to 6 per cent in the October-December period before slowing to 5.5 per cent in early 2024.

"We all know the big picture story is very positive, but I feel like discussions about economic growth often get lost between the cyclical and the structural and at the moment, we're definitely in a cyclical slowdown," said Miguel Chanco, chief emerging Asia economist at Pantheon Macroeconomics.

"A lot of the drivers that drove the really strong growth from the middle of 2021 to last year have been exhausted. A weak external backdrop is weighing on Indian economic growth as well as sluggish private consumption and sluggish investment."

A majority of economists, 22 of 36, who answered an additional question said the risks to their FY 2023-24 GDP growth forecasts were skewed to the downside.