Theme: Macro Economy - India’s GDP growth slips to 5.4%: is it a temporary blip?

In this episode of the State of the Economy podcast, businessline’s Shishir Sinha talks to Upasna Bhardwaj , Chief Economist with Kotak Mahindra Bank, discussing recent economic data and the broader economic outlook for India. The conversation centers around some key high-frequency economic indicators, such as the GDP growth rate, GST collections, the Purchasing Managers' Index (PMI), and inflation figures.  The podcast begins with Bhardwaj diving into the surprising GDP growth number for Q2, which came in at 5.4%, well below expectations. She explains that the GDP slowdown is primarily driven by a weak industrial sector, with manufacturing and mining showing significant weakness. While consumption demand has also been subdued, some high-frequency data for October and early November suggest a potential slight pickup, likely due to the festive period.   However, Bhardwaj emphasises that a broader recovery remains uncertain, with both global demand and domestic factors such as weak capital spending and regulatory constraints on lending posing challenges.  The conversation then shifts to other economic indicators like GST collections, which showed an 8.5% year-on-year growth in November, but with a monthly decline, likely due to fewer working days during the festival season. Despite some moderation, Bhardwaj notes that GST growth is now in line with nominal GDP growth, indicating that there is no significant disparity between these two indicators.  The discussion also touches on inflation, with Bhardwaj forecasting a retail inflation rate of around 5.7% for the upcoming month. She explains that this is higher than the Reserve Bank of India's (RBI) earlier projections, which could influence their upcoming policy decisions. She suggests that the possibility of an interest rate cut, previously expected only in the next fiscal year, might be brought forward to February, especially as the RBI faces a challenging trilemma involving inflation, growth, and liquidity concerns.