India’s economy likely expanded by 6.3 per cent in the third quarter of the fiscal, rebounding from 5.4 per cent in the previous quarter, as rural demand and increased government capital expenditure provided a much-needed boost, economists said.

However, the uneven nature of the recovery raises concerns about the sustainability of growth in the coming quarters. A revival in rural consumption has played a critical role in the rebound, marking a shift from the previous quarters when growth was constrained by weak demand outside urban centres.

“The improvement is led by a revival in rural demand and a rise in central government capital expenditure. Urban demand is also showing some signs of improvement, but the recovery remains relatively softer,” said Gaura Sengupta, chief economist at IDFC First Bank.

This divergence between rural and urban consumption could have implications for the structure of future growth, particularly if urban spending remains sluggish.

The government will release revised data for the previous fiscal, along with second-advance estimates and third-quarter GDP data on February 28.

High-frequency indicators suggest a clear recovery in Q3 after growth slowed to a near two-year low in Q2. “Passenger vehicle sales, petrol consumption, domestic air traffic, and central government capital expenditure have all improved in Q3 compared to Q2,” said Rajani Sinha, chief economist at CareEdge.

However, the reliance on government spending to drive growth underscores the private sector’s hesitancy, particularly in investment.

Bank of Baroda economist Jahnavi Prabhakar projects Q3 GDP growth at 6.6 per cent, attributing the relatively subdued pace to weak manufacturing activity and base effects.“Revival in consumption and rising government spending should support overall growth in Q4,” she said.

ICRA expects GDP growth to rise to 6.4 per cent in Q3 from a seven-quarter low of 5.4 per cent in Q2, benefiting from government spending and a turnaround in exports.

Chief economist Aditi Nayar pointed to stronger services exports, higher kharif crop output, and festive-season demand as key factors supporting growth, but noted that urban sentiment remains fragile.