Citi India’s Chief Economist Samiran Chakraborty expects GDP growth to remain above 7% in the April-June quarter, supported by high-frequency indicators such as credit growth, exports and automobile sales.However, he said the final outcome would also depend on corporate earnings and the impact of the monsoon.
Santanu Sengupta, Chief India Economist at Goldman Sachs, also said the Indian economy has remained resilient despite global uncertainties, supported by easing oil prices, strong credit growth and the impact of earlier monetary policy easing.
The economists noted that India’s economy has weathered external shocks better than expected. They attributed this to the country’s energy resilience, healthy inventory levels, stronger refining capacity and the increasing use of renewable energy, which helped cushion the impact of geopolitical tensions in the Middle East.Sengupta expects India’s GDP to grow 6.8% in the April-June quarter and believes the forecast carries an upside bias.These are edited excerpts from the interview.Q: If January-March was 7.8% and if April, May, June has seen 17% credit growth, 16% export growth for April, May at least, and fiery auto sales. Should we be prepared for a 7% plus GDP for this quarter and for the year?Chakraborty: Our own number for the quarter is 7% plus. The high frequency indicators that we have got, they are tracking that around 7% GDP growth number. However, as you know, large part of the GDP comes out of the corporate earnings, we are yet to find out that how that corporate earnings numbers will look like for the quarter. Based on that, we might have to tweak the numbers a little bit up and down.But for now, 7% is a real possibility, and there is a good reason behind it. We would have to go back and see that 2025 was a year of stimulus for India, and that stimulus effect gave the economy a certain kind of momentum, which probably was able to counter the headwinds coming from the Middle Eastern conflict situation, and even from the conflict, I have always maintained that two things worked in India’s favour. India does not produce power out of natural gas, and India had enough diesel and petrol stock, because it’s a refining economy. Because of these two things, power and transport, two of the most important things in growth, was not affected.With that stimulus and these two supporting factors, the economy did pretty well, even through the April-June period. Now, whether there is any lingering effect from this shock that still will pass on into the rest of the year, whether the shock can re-emerge or not, these are still open questions.For now, whatever macro high frequency data we are tracking seems to suggest that things have held up better than what probably people would have feared.Q: Would you say there is an upside bias to your 6.9% forecast? The reason I called both you and Sengupta is that you’re at the higher end of the GDP forecasts. Sengupta is at 6.8% and you are at 6.9%. Would you say there is now an upside bias to the 6.9% forecast, going by the April-June data? Chakraborty: We have to be honest in admitting that this decimal place forecasts are not easy, and we should not put too much emphasis on this, the decimal number after the 6% or 7%. One of the things that we are still yet to figure out fully is El Nino effect, so maybe that’s why we have taken about a 20-basis point odd lower number on our forecast, thinking that that’s the kind of El Nino growth effect that we have to factor in for.If monsoon turns out to be better than what feared, then maybe there is some upside to our GDP growth forecast as well, based that based on the fact that we have already taken that 20-basis point downside in our forecast.Q: I have a hunch that economists were very bearish in April and May because of the way the rupee and crude oil were behaving. Now that things have changed dramatically—crude has fallen from above $100 to around $70-75 and we are seeing this FCNR inflow—maybe we need to revise the numbers. Sengupta, given the recent data, would you say there is an upside bias to your 6.8% forecast?Sengupta: I would just say that there are two parts. the economy has been more resilient through the crisis, but that’s not true only for India. It’s true for many other emerging markets as well.Inventory draws have been quite stark across the world. Refinery runs have also been quite high, and that has cushioned most economies. That was a learning for us as well—that countries are able to withstand these kinds of shocks better.
The second point, apart from power, which Samiran rightly pointed out, is that India has been able to switch to other forms of fuel very quickly. The surge in renewable energy has also been quite significant over the last several years. This isn’t related to the Middle East conflict, but rather to the post-pandemic shift towards renewables. As a result, India did not experience the kind of shortages seen in countries that remained dependent on fossil fuels.Going forward, we see a slight upside risk to our full-year forecast, mainly because of where the conflict stands currently and the fact that oil prices are in the low to mid-$70s per barrel.However, it’s worth remembering that consumers were largely insulated from higher fuel prices until about mid-May. June was the first month when consumers began feeling the impact of higher prices, and the current quarter will be the first full quarter reflecting that effect.Having said that, as you pointed out, credit growth is improving and monetary policy stimulus is working through. I would say there is a slight upside risk to our numbers based on the current environment.Q: And your first-quarter number?Sengupta: Our forecast is 6.8%, and I believe it carries an upside bias.Q: You were saying that it’s not just India—many countries have shown resilience. I was looking at export growth across several countries, and many of them posted double-digit growth. India’s performance was even stronger in April and May. I am referring only to goods exports, not services. Goods exports grew 13.5% in April and 18% in May. There seems to be a favourable global growth engine. Would that be a reason to upgrade India’s growth forecast as well?Sengupta: We should be careful about looking at the composition of goods that countries were demanding during that period. For instance, India’s exports to the Middle East shrank in March but rebounded very quickly afterwards. If you look at the charts, you will see a sharp decline followed by an equally sharp recovery.India was also supplying refined petroleum products to the region, particularly to Southeast Asia. Singapore was a major importer of these products, and that explains a large part of the goods trade during that period.Overall, one important positive is credit growth and its broad-based nature. Industrial credit growing at 15% is a very positive sign and suggests there could be upside risks to growth.Q: Chakraborty, on FCNR deposits—how much are you expecting now that we’re a few weeks into the scheme? If it is around $50 billion, that’s roughly ₹5 lakh crore of additional funds available with banks. How much are you expecting, and will that also have a positive impact on growth?Chakraborty: It’s difficult to estimate at this stage how much money will come in. If I extrapolate from the foreign exchange reserves data that the RBI publishes every week, it doesn’t appear that a significant amount of money has flowed in yet.Our estimate is that all three schemes combined could bring in an additional $55-60 billion. This would clearly increase the availability of resources in the financial system for lending. Part of these funds could be used to retire high-cost debt, while the rest could be deployed for credit.Since this is a lean period for credit demand, some of the money may initially flow into bond investments before being lent out.The bigger point, however, is that credit growth is already very strong. The RBI recently released NBFC monthly credit data, which showed that retail credit growth, excluding housing, is close to 25%. Credit growth for consumer durables is 42%, while gold loan growth is close to 70%.There is clearly strong momentum in credit growth, and that is probably supporting consumption as well. Once consumption recovery gathers pace, it can feed into a broader investment recovery.We need to closely monitor how much of this additional liquidity is absorbed through stronger credit growth and how much the RBI may have to absorb through sterilisation measures.For the entire discussion, watch the accompanying videoFollow our live blog for more stock market updates
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