ICRA has predicted that the GDP of India will touch 6.4 percent in the December quarter of this year, following a rise in government expenditure and notwithstanding unsteady patterns of consumption.

The Indian economy has grown at a rate of 6.7 percent during the April-June period, with a further deceleration to just 5.4 percent in the subsequent quarter of September, recording the lowest growth rate in seven quarters, primarily because of sluggish government capital spending because of general elections and weak consumer demand.

Chief Economist Aditi Nayar said that the strong government spending, both central and state, on capital and revenue account for shining services export growth, improving merchandise exports flows, perennial kharif crop productions, which likely meant positive rural sentiment, contributed to the performance of the economy in India in FY2023 Q3.

Consumer sectors continue to witness some growth during festive seasons although there was a slight dip in urban consumer sentiments. Meanwhile, sectors like mining and electricity saw recovery following weather-related disruptions in the previous quarter.

"Overall, while we expect the pace of GDP and the GVA expansion to rise in Q3 FY2025 relative to the seven-quarter low prints for the previous quarter, marking an upturn, the performance may remain inferior to the NSO's initial estimates for Q1 FY2025," Nayar’s opinion.

The National Statistical Office (NSO) is set to release the growth estimates for October-December on February 28, along with the second advance GDP estimates for the current fiscal year.

In the first advance estimates released in January, the NSO projected GDP growth at a 4-year low of 6.4 percent for the current fiscal, while the RBI expects growth to reach 6.6 percent.

ICRA forecasts the economy to grow at 6.4 percent in Q3, up from 5.4 percent in Q2, driven by increased government spending amid uneven consumption, according to a statement.

Investment activity in India improved during Q3, as evidenced by the year-on-year growth in several investment-related indicators compared to Q2, the rating agency noted.

This includes output from capital and infrastructure goods, cement production, engineering goods exports, and capital spending by both the Centre and state governments. The year-on-year growth in government capital expenditure surged to a six-quarter high of 47.7 percent in Q3, up from 10.3 percent in the previous quarter.