Q3 GDP data due next week are likely to show a further slowdown in India’s economy, with the industrial sector the main source of weakness. However, some comfort can be taken from the fact that the services sector – which accounts for over 50% of the economy – appears to have held up better. The surge in government spending in the last quarter points to strong growth in public administration. Meanwhile, activity in the financial services and tourism sectors strengthened too. And there are signs of a further pick up at the start of Q4. With industrial output also likely to gradually recover following recent policy stimulus, we think that Q3 should mark the bottom for overall GDP growth.
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