The economy is estimated to have grown at a slower pace in the second quarter of the current fiscal (Q2FY25) with analysts pegging GDP growth at 6.5% to 6.8% in the quarter. High frequency indicators registered slower than anticipated growth in the July to September 2024 quarter suggesting lower demand and leading to the expectation that overall economic growth too slowed down in the quarter.
The economy is estimated to have grown at a five-quarter low of 6.7% in the first quarter of the fiscal with lower government capex as well as muted farm sector growth at 2% seen to be two of the main reasons for the slowdown. It grew by 8.1% in the second quarter of 2023-24 as per the provisional estimates. Official quarterly GDP estimates for the quarter July-September of 2024-25 will be released on November 29.
Rating agency ICRA expects GDP growth in the second quarter of the fiscal to slow down to about 6.5% in the second quarter of the fiscal with excess rainfall weighing upon activity in some sectors such as mining, electricity generation, construction, and retail footfalls. “However, this is likely to be intermittent; we expect growth to pick up above the 7.0%-mark in H2 FY2025 aided by tailwinds owing to an improvement in rural demand and an acceleration in Government capex.,” said Aditi Nayar, Chief Economist and Head – Research & Outreach, ICRA.
SBI Ecowrap in a recent report also pegged second-quarter GDP growth at about 6.5% but underlined that recovery is seen in the October data. “Leading indicators are showing mixed signals. For instance, domestic passenger vehicle sales which is an indicator of urban demand as well as other indicators of consumption and demand as diesel consumption, electricity demand and bitumen consumption have eased. Transport and communication indicators as passenger and freight traffic at airports and toll collection are showing traction, however, e-vehicle registration continues to lose steam in August 24 and September 24. Thus, growth seems to be entering a softer patch,” it said.
Rajani Sinha, Chief Economist, CareEdge Ratings said the agency has revised its second quarter GDP growth estimate to 6.8% from the previous forecast of 7%. “The economic slowdown is not as steep as was being projected. While there was some slowdown in high frequency data such as PMI, industrial production, IIP in the second quarter of the fiscal, these seem to have shown some improvement in October,” she noted.
The State of the Economy article in the Reserve Bank of India’s monthly bulletin has also forecast GDP growth at 6.8% in the second quarter of the fiscal noting that certain high frequency indicators have shown a slackening of momentum.
However, most analysts continue to expect better growth in the third and fourth quarter of the fiscal and expect GDP growth for FY 25 at 7%. “Expected buoyancy in Q3 and Q4 growth numbers could still push overall yearly GDP growth closer to 7% in FY25,” the SBI report also noted.
Moody’s in a report on Friday said that from a macroeconomic perspective, the Indian economy
is in a sweet spot, with the mix of solid growth and moderating inflation. It has forecast 7.2% growth for calendar year 2024, followed by 6.6% in 2025 and 6.5% in 2026.
