India’s GDP growth likely to slow to 6.5%, keeping pace at 7% in FY25: Icra
Domestic rating agency Icra on Wednesday said India’s real GDP growth in the September quarter may have slowed to 6.5 percent due to heavy rains and weak corporate performance.
The agency, however, maintained its FY25 growth estimate at 7 percent in anticipation of economic growth in the second fiscal quarter. The ratings and comments on the outlook come at a time when there are concerns about slowing growth from many factors such as declining demand for cities.
The RBI stuck to its 7.2 percent fiscal growth estimate, but most observers expect it to be below the 7 percent figure and many have been revising it for the past few weeks.
Official data on economic activity for Q2 is expected to be published on November 30. In Q1, GDP growth reached 6.7 percent. Icra said the dip in Q2 will be attributed to factors such as heavy rains and weak corporate margins.
“Although government spending and kharif planting show positive trends, the industrial sector, especially mining and electricity, is expected to slow down,” said the statement. The services sector is expected to improve, and rebound is expected, leading to annual GDP growth of 7 percent, it added.
“Q2 FY2025 had an emergency in terms of capex uptake after the Parliamentary Elections and a healthy increase in sowing of major kharif crops.
“Many sectors have faced tough conditions due to heavy rains, which have affected mining activity, electricity demand and retail sales, as well as reduced exports,” said senior economist Aditi Nayar.
He said the benefits of healthy monsoons are still forthcoming, with high kharif output and recharged reservoirs likely to lead to further improvement in rural sentiment. There is a lot going on in GoI’s spending, which needs to increase by 52 percent in YoY terms in H2 FY2025 to meet the full-year budget estimate, Nayar added.
“We are looking at the impact of the slowdown in personal loan growth on personal consumption and political developments on commodity prices and external demand,” the senior economist said.
In Q2, investment activity improved over Q1, while it remained weak amid slow execution of infra projects due to heavy monsoon rains, the agency said, adding that new project announcements saw a healthy return to Rs 6.7 lakh crore in Q2 .
