NEW DELHI: India's economic growth is projected to rebound significantly in the October-December quarter (Q3) of the current financial year, thanks to renewed government spending and improvement across several key economic indicators. Economists estimate growth for Q3 to fall between 6.2% to 6.4%, which is noticeably higher than the seven-quarter low of 5.4% observed during the July-September quarter.
The previous quarter's slowdown was attributed to various factors, including decreasing government expenditure tied to electoral processes and sluggish consumer spending due to persistent inflationary pressures. Aditi Nayar, chief economist at Icra, noted, "India's economic performance in Q3 FY2025 benefited from a sharp ramp-up in aggregate government spending on capital and revenue expenditure, high growth in services exports, and healthy output from major kharif crops, bolstering rural sentiment. Although there was a slight dip in urban consumer sentiment, some consumer-focused sectors saw improvement during the festive season, along with recovery in mining and electricity sectors following weather-related challenges from the previous quarter."
The economic revival is being observed amid important discussions at the annual BS Manthan summit, which began on February 27 to mark Business Standard's 50th anniversary. This event has attracted policymakers, business leaders, and economic experts to examine India's strategic positioning within the changing global economic framework and its growth prospects. Union Finance Minister Nirmala Sitharaman inaugurated the summit, delivering her keynote address titled 'The Great Reset: India in a New World Order'. She underscored the necessity for India to prioritize its interests amid global transitions, emphasizing trade and technology as its foundational pillars for growth.
Sitharaman remarked, "Every country wants to be treated special and wants to be sure the special treatment they get isn't automatically extended to everyone else". She emphasized the significance of attracting talent and ensuring stability amid global economic disturbances, insisting upon the importance of policy clarity to navigate the future.
Veteran banker Uday Kotak shared insights on the evolution of finance, predicting the decline of traditional banking in favor of digital solutions. He expressed concerns over the influence of politics on global finance, particularly highlighted during the Trump administration, which he said has disrupted established market norms. Kotak told attendees, "The real challenge is to revive our animal spirits—the drive to build, invest, and grow fearlessly. That’s what will define India’s future in the global economy."
Chris Wood, global head of equity strategy at Jefferies, projected a 10-15% rise for the Indian stock market within the next year if foreign institutional investors revert to the market. While optimistic about the long-term, he maintained caution about existing valuations and suggested shifting foreign investments toward China. Wood noted, "If someone has no exposure to Indian stocks, they should start buying now; when the tide turns, the rally would be very sharp. But for now, we are still in 'sell on rise' market dynamics rather than 'buy the dips' scenario."
PK Mishra, principal secretary to the Prime Minister, reiterated the 'Aatmanirbhar Bharat' vision at the summit, advocating for self-sufficiency and reduced reliance on external supply chains. He stated the Covid-19 pandemic exposed vulnerabilities which demand we strengthen domestic capabilities and reduce dependency. Mishra declared, "Even during slowdowns, PM Modi sought opportunities rather than merely responding to crises." He also noted the significance of agriculture during these transitions and the importance of policies to support rural economic stability.
Union Environment Minister Bhupender Yadav stressed the acceleration of renewable energy initiatives, declaring India's achievements under the Paris Agreement. He highlighted India's strategic leadership within the Global South and emphasized the need for guaranteed access to climate finance and technology from developed nations. Yadav asserted the goal to balance economic growth without compromising sustainable practices, stating, "Our aim is to push for sustainable practices worldwide, ensuring economic aspirations of developing nations are respected."
Amitabh Kant, India’s G20 Sherpa, accentuated the urgent need for India to lead the electric vehicle (EV) sector, arguing for immediate adoption through government practices. He contended, “The government should become the first driver of EV adoption.” Kant also called for industrial growth through expedited policy reforms to solidify India’s economic standing globally.
According to Dharmakirti Joshi, Chief Economist at Crisil, India now aligns more closely with global economic cycles due to intensified trade relationships and financial linkages. Joshi projects growth at 6.5% for the upcoming fiscal year and suggests adopting the right policies could push growth even higher. Joshi added, "India has the ability to accelerate even more with appropriate interventions."
Laveesh Bhandari, president of CSEP, urged strengthening India's internal capacity as foundational to its global rise. He proposed pursuing multiple Free Trade Agreements (FT-As) aligned with India's needs and spotlighted the judiciary's efficacy as pivotal to economic conditions. Bhandari stated, "Is our judiciary equipped to assure contracts are kept? Certainly not."
On the international front, Tushar Vikram of Mashreq highlighted India's strengthening ties with the UAE, following the Economic Partnership Treaty signed with the UAE, which is projected to bolster trade. Sundeep Sikka from Nippon Mutual Fund pointed out the increasing role of mutual funds as conduits for household savings to spur growth, noting mutual funds now account for 6% of household savings, up from just 0.8% ten years ago.
With speakers addressing various sectors including defense procurement, R&D collaboration, and the future of auditing practices, the summit's scheduled discussions point toward significant influences on India's economic strategies. The BS Manthan summit will continue to provide insights as it tackles topics surrounding the semiconductor industry and labor markets.