India's economy cooled in the third quarter due to faltering domestic demand and pressuring the central bank to ease monetary policy to avert a sharper slowdown, according to analysts.

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The gross domestic product (GDP) grew by 6.6 percent in the October-December quarter, lower than the 6.8 percent anticipated by economists, suggesting an interest rate cut may be back on the table.

"On monetary policy, with low food prices keeping the RBI’s inflation projection for end-2019 below 4 percent and growth prospects dull, we believe the RBI will deliver another 25 basis points rate cut at its April policy meeting," analysts at Nomura wrote in a note.

The third-quarter GDP is the slowest growth rate in five quarters since July-September 2017, dragged by weak consumer demand.

The economic data comes just days after the Reserve Bank of India (RBI) cut its policy interest rate by 25 basis points to 6.25 percent, and changed its stance to "neutral" to boost a slowing economy as inflation has come down sharply. One basis point is one-hundredth of a percentage point.

The next meeting of the RBI is scheduled from April 2 to 4.

The government on Thursday also revised the economic growth estimate for the current fiscal year ending March 31 to 7 percent from an earlier estimate of 7.2 percent.

Here's what brokerages are saying on the GDP data:

Nomura

Observe a divergence of growth drivers in the third quarter

Most slowdown is in the government consumption and agriculture sectors

Investment, industry, private services and net exports continue to support growth

Expect growth to slow further to 6-6.5 percent in the first half of 2019

Believe RBI will deliver another 25 basis points rate cut in April policy

HSBC

GDP growth slowed as expected, and is likely to slow further

Agriculture sector was weaker while the construction space picked up

Consumption slowed, whereas, investment and net exports also improved

Expect GDP growth to rise back above 7 percent in the second half of FY19

Credit Suisse

Q3 GDP moderated to 6.6 percent from a downward revised 7 percent in Q2

The two-year compound annual growth rate (CAGR), meanwhile, rose marginally to 7.1 percent, as the December 2016 quarter had a low base

FY19 estimate cut implies Q4 GDP growth is estimated to grow at 6.3 percent as the economy has continued to slow down in Q4

The real estate sector remains under stress but the GST rate cut should help in FY20

Monetary Policy Committee’s growth and inflation projections now have downside risk, creating room for policy easing

PhillipCap

Q3 GDP data muted largely on the slowdown in the government spending and agriculture output space

Positive surprise came from the construction sector

Agriculture/industries growth rate was below expectation at 2.7 percent/6.1 percent

Private consumption was also robust in Q3 at 8.4 percent vs 9.8 percent in Q2

Going ahead, expect consumption to remain strong

Estimate for FY19 is maintained at 7 percent and for FY20 at 7-7.2 percent

CLSA

December-quarter GDP figures are marginally below expectation

Economy has mostly normalised after Demonetisation and GST but the overall economic conditions remain subpar

Expect GDP growth to be around 8% in FY20

First Published:Mar 1, 2019 8:47 AM IST