India’s economy likely grew 6% in the third quarter of the current fiscal year, slower than the first two quarters, as the waning base effect overshadowed an economic recovery, an ET poll of economists showed.

The 11 economists polled by ET predicted the October-December quarter growth in the 4-6.6% range, with a median estimate of 6%. India’s gross domestic product had grown 20.1% and 8.4% in the first and second quarters, respectively, and 0.5% a year earlier.

“Even as a normalising base is expected to dampen the growth in GDP in sequential terms, the performance relative to the pre-Covid level is likely to have improved markedly in the third quarter,” said Aditi Nayar, chief economist at ratings firm ICRA.

Economists said at the expected range in the third-quarter expansion and with the Omicron wave denting the economy in the current quarter, the fiscal 2022 growth could be lower than the 9.2% forecast by the government.

India Ratings expects GDP growth in the first two quarters to be 0.9-1.1 percentage point lower than previously reported and has lowered its projection to 5.6% for the third quarter and 5.1% for the fourth, from 6% and 5.7%, respectively.

High-frequency Indicators Present a Mixed Picture

“This would translate into a GDP growth rate of 8.6% on-year for FY22 compared to 9.2% in the first advance estimates,” said Sunil Kumar Sinha, principal economist, India Ratings & Research.

The National Statistical Organisation will release the third-quarter GDP and second advanced estimate of national income for FY22 on February 28.

India’s economic recovery gained some traction, and a cautious revival was seen in the contact-intensive sectors promoted by rising vaccine coverage in the quarter, they said.

The impact of the Omicron wave that started in late December would mostly be seen in the January-March quarter.

“We expect GDP growth at 6.2% in the third quarter as the low base effect from last year, which was at play in the first half of FY22, fades,” said HDFC Bank economist Sakshi Gupta.

As per Gupta, agriculture is estimated to have grown 4% while industrial growth is likely to be a drag with low growth expected in manufacturing.

SBI forecasts GDP growth for the quarter at 5.8%, with a downward bias. It has pared the full-year FY22 GDP growth to 8.8% from its earlier estimate of 9.3%.

“Tailwinds from reopening of more sectors, resumption of contact-intensive activities and festivities are expected to have fuelled domestic engines, whilst net exports were a drag,” said Radhika Rao, senior economist at DBS Group Research, adding that base effects were turning less favourable.

“While a sequential recovery is likely to remain underpinned, we see it being driven more by services, rather than manufacturing,” said Rahul Bajoria, chief India economist at Barclays, adding that with the mild Omicron wave in January, there was a clear downside risk to the FY22 growth forecast of 10%.

High-frequency indicators present a mixed picture – while industrial production and vehicle sales have been sluggish, exports, rail freight traffic and goods and service tax e-way bills have shown robust growth.

“GDP growth in the third quarter has been impacted by the restrictions imposed due to Omicron as well as the waning base effect,” said Bank of Baroda chief economist Madan Sabnavis, forecasting 4% growth in GDP in the quarter gone by.

Services are likely to see some pick up with higher government spending and a rise in credit growth, said Gupta of HDFC Bank.