A security guard at the Reserve Bank of India (RBI) headquarters in Mumbai, India
A security guard at the Reserve Bank of India (RBI) headquarters in Mumbai, India, August 5, 2022.

India's lower-than-expected economic growth in April-June is unlikely to alter the course for the Reserve Bank of India that is anchored to taming inflation with more rate hikes, analysts said.

Asia's third-largest economy grew 13.5% in the April-to-June quarter, its fastest pace in a year, though below the 15.2% forecast by economists in a Reuters poll, data showed on Wednesday.

Growth, however, was well above 4.1% in the previous quarter. For 2022/23, the Reserve Bank of India (RBI) has projected economic growth at 7.2%.

"(April-June) GDP data release should not be a game-changer for monetary policy," Nomura analysts Sonal Varma and Aurodeep Nandi said in a note.

The RBI had raised repo rate by 50 basis points in August to 5.40%, taking aggregate hikes to 140 bps in May-August.

The next policy decision is due on Sep. 30, with majority of the participants expecting another hike, though the quantum may come down.

Nomura kept its view of a 35 bps repo rate hike in September and a final 25 bps increase in December, with a 6% repo rate, before global growth concerns and the cumulative hikes potentially lead the monetary policy committee (MPC) to shift into an "extended pause."

India's retail inflation has stayed stubbornly above 6% for seven straight months, while the RBI's tolerance band remains 2-6%.

"We expect the RBI to deliver another 50 bps of rate hikes over two meetings in September and December, taking the repo rate to 5.90%, which should also be the time when real rates reach levels desired by the MPC," said Rahul Bajoria, chief India economist at Barclays.

Meanwhile, some analysts cut India's 2022/23 economic growth forecast to below RBI's 7.2% outlook.

"While pent up demand has supported growth over the last few months, weakening exports could become a considerable drag," Pranjul Bhandari, Chief India Economist at HSBC, said in a note, adding, that she expects GDP growth at 6.8% in 2022/23.

IDFC First Bank has revised growth estimate to 7% from 7.3% previously.