India’s economy made a slight recovery, growing at 4.8 per cent in the July to September quarter, but significant risks remain that could hamper a sustained rebound over the coming months, analysts say.

The latest GDP figures, released after the markets closed on Friday, showed an improvement on growth of 4.4 per cent in the previous quarter, boosted by the agricultural and industrial sectors.

That “was a positive surprise and suggests that underlying growth conditions are not as weak as previously feared”, HSBC said. “However, it is also important to recognise that part of the pick-up was temporary and that the road to recovery is still long and, potentially, bumpy.”

In the past financial year, India’s economy grew 5 per cent, the weakest in a decade. The consensus is that the country needs economic growth of about 8 per cent to provide jobs for its young population.

India has also been struggling with high inflation and significant fiscal deficits.

General elections are expected to be held by May, and the political uncertainty is deterring investments.

HSBC said a further recovery in annual GDP growth would prove challenging in the coming quarters.

“It will, essentially, be made difficult by the washing out of the monsoon effect on agriculture and electricity production, the normalisation of net exports, and the possibly larger drag from stepped-up fiscal consolidation efforts,” the bank said.

The growth in agriculture was largely thanks to positive monsoon rainfall this year after last year’s disappointment.

Crisil Research said it expected agricultural growth to accelerate in the third quarter as the impact of the monsoon rains fully materialises.

It is forecasting economic growth of 4.8 per cent for the current financial year that ends in March.

HSBC said India’s economic growth had to be driven by stepped- up implementation of structural reforms, particularly the investment projects that have secured regulatory approval.

“Bringing inflation under control and delivering on the fiscal target is also critical,” it said.

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