Growth accelerated to 4.8 percent year-on-year in Q3 of this fiscal from the more than four-year low of 4.4 percent in Q2. (Agencies)
"This was fractionally higher than our forecast of 4.7 percent year-on-year," said the consultancy from its Singapore office on Friday.
The manufacturing sector returned to growth, but its 1.0 percent year-on-year increase in output last quarter was still pretty tepid. There were stronger out-turns from agriculture and, in particular, services, it noted in the commentary.
The expenditure-side data were not consistent with the headline GDP figures, but they point to a pick-up in investment and exports last quarter alongside continued weakness in consumption.
"Looking ahead, we believe that India's road to recovery will be slow and bumpy," Capital Economics said.
The monthly data suggest that the momentum of the recovery was not particularly strong.
For example, industrial production accelerated in July, then slowed in August before recovering only some of the lost ground in September, it said.
High consumer and wholesale price inflation would keep household and corporate budgets under pressure.
In addition, the central bank's hawkish posture means that monetary policy would not provide support anytime soon, it added.
Investment activity was likely to stay subdued as the government's efforts so far have not had any visible success in reinvigorating appetite for new projects or in clearing project bottlenecks, it pointed out.
Finally, with the budget deficit already at 76 percent (April-September) of the full-year target, the room for expansionary fiscal policy in the remainder of FY2013/14 (which ends in March) will be limited.
"Overall, we think that the recovery will be relatively subdued. We forecast GDP growth of 4.7 percent and 5.0 percent for 2013 and 2014, respectively," said Miguel Chanco, Asia Economist at Capital Economics in Singapore.
Growth accelerated to 4.8 percent year-on-year in Q3 of this fiscal from the more than four-year low of 4.4 percent in Q2.