India's economy is likely to remain one of the fastest-growing major economies in the world, but the pace may cool in the months ahead, economist Madan Sabnavis said, warning that growth could slip below 7% in the second half of the fiscal year even as the full-year average still lands around 7.2%.
Sabnavis's assessment points to a familiar pattern in India's macroeconomic cycle: a strong base of domestic demand, public spending and services activity can keep headline growth elevated, but sequential momentum often softens as the year progresses. His projection of 7.5% to 7.6% growth in the second quarter suggests the economy has retained solid traction through the early part of the year, even if the second half may prove more challenging.
Growth Still Above Trend
Sabnavis said India's medium-term potential growth rate remains around 8%, a level that reflects the economy's structural advantages, including a large domestic market, ongoing formalisation, and a still-supportive investment environment. That estimate matters because it frames the current slowdown not as a sign of deep weakness, but as a movement toward a more sustainable pace after periods of outsized expansion.
A full-year average of 7.2% would still place India well ahead of most large economies and reinforce its position as a global growth outlier. Yet the forecast also signals that the strongest phase of the recovery may be behind it, with the second half likely to face a less favourable mix of base effects, uneven private consumption and the normalisation of some high-frequency indicators.
The economist's view is especially relevant for policymakers watching whether growth can be maintained without relying excessively on government expenditure. If second-half expansion does indeed fall below 7%, the burden of sustaining momentum may increasingly shift to private investment, credit demand and rural consumption.
Second-Half Softening Risks
The expected moderation in the second half does not necessarily imply a broad-based downturn. Rather, it suggests that growth may lose some of the lift seen earlier in the year, when manufacturing, services and public capex may have provided a stronger push. Seasonal factors, tighter financial conditions in some segments, and the fading impact of one-off boosts can all contribute to a slower pace.
For markets, the distinction is important. A deceleration from above 7.5% to below 7% would still be consistent with robust expansion, but it could influence expectations around monetary policy, fiscal room and corporate earnings. Investors typically watch whether growth is broadening across sectors or becoming too dependent on a narrow set of drivers.
Sabnavis's comments also imply that India's growth story remains intact, even if it is no longer accelerating. That is a meaningful signal at a time when global demand is uneven, commodity prices remain volatile and external risks continue to cloud the outlook for trade-dependent economies.
Policy Balance Ahead
The broader policy challenge is to preserve high growth while avoiding overheating in pockets of the economy. If the economy is indeed running near its potential of 8% over the longer term, then the current forecast suggests India is operating close to capacity, making productivity gains and investment efficiency more important than short-term stimulus.
For the government, the message is twofold: maintain capital expenditure and reform momentum, but recognise that headline growth may naturally ease from the strongest quarterly readings. For the Reserve Bank of India, a growth rate still above 7% would likely keep the policy debate focused on inflation management and financial stability rather than emergency support.
Sabnavis's outlook offers a cautiously optimistic reading of India's macroeconomic position. Growth may slow in the second half, but the economy still appears capable of delivering a strong annual performance and preserving its status as one of the world's most dynamic large markets.