India economic growth likely accelerated to 7.7 per cent in the April-June quarter, the fastest annual pace in a year, on robust service sector growth, strong demand and increased government capital expenditure, a Reuters poll found.

All but two of 51 economists surveyed between Aug. 18 and Aug. 24 expected gross domestic product (GDP) growth to beat the January-March quarter's 6.1 per cent rate, with forecasts ranging from 5.6 per cent to 9.1 per cent range.

"Economic activity in Q1 FY-2024 was boosted by a continued catch-up in services demand and improved investment activity, particularly a welcome front-loading in government capital expenditure," noted Aditi Nayar, chief economist at ICRA.

Growth in the service sector, the main engine of Asia's third-largest economy hit a 13-year high in July, a private survey showed.

Capital expenditure increased to around 2,785 billion rupees ($33.7 billion) during April–June 2023 from the 1,750 billion spent during the same period last fiscal year.

But growth was forecast to moderate to 6.2 per cent this quarter followed by 6.0 per cent next quarter before slowing to 5.5 per cent in the last quarter of this fiscal year, according to a separate Reuters poll.

India needs even higher growth to provide employment for its millions of unemployed youth, economists say.

"We expect India's potential growth to inch toward but not exceed 6.5 per cent over the next five years. We believe that policymakers should target a rate of 8.5-9.0 per cent on a sustainable basis to make a meaningful dent in the unemployment problem," said Kunal Kundu, India economist at Societe Generale.

The Reserve Bank of India, which has hiked its key repo rate 250 basis points since last May to curb high inflation, forecasts growth of 6.5 per cent this fiscal year.

The data is not expected to alter the outlook for unchanged rates from the RBI through Q1 2023.

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