Economy: GDP growth may slip in Q2FY25 but pickup later, says ICRA
Virendra Pandit
New Delhi: India’s rating agency ICRA, an affiliate of Moody’s, on Wednesday said the country’s real GDP growth in Q2FY25 is likely to decline to 6.5 percent because of heavy rains and weaker corporate performance during the second quarter (July-September) of 2024-25.
The agency, however, maintained its overall FY25 growth estimate at 7 percent on expectations of a pickup in economic activity in the second half of the fiscal (October 2024-March 2025).
The ICRA estimates and commentary on the outlook comes when concerns around the growth slowdown have cropped up because of factors such as diminished urban demand.
The RBI is sticking to its estimate of 7.2 percent growth for the current fiscal, but a majority of watchers expect it to be under the 7 percent figure and have been revising down in the last few weeks.
Official data for the Q2 economic activity is expected to be published on November 30. In Q1, the GDP expansion was 6.7 percent.
ICRA said the dip in Q2 might be due to factors like heavy rains and weak corporate margins.
“While government spending and kharif sowing have shown positive trends, the industrial sector, particularly mining and electricity, is expected to slow down,” it said.
The services sector may improve, and a back-ended recovery is anticipated, leading to full-year GDP growth of 7 percent, it added.
“The Q2FY25 saw tailwinds in terms of a pickup in capex after the Lok Sabha elections and a healthy expansion in sowing of major kharif crops. Several sectors faced headwinds because of heavy rainfall, which affected mining activity, electricity demand and retail footfalls, and a contraction in merchandise exports,” ICRA’s chief economist Aditi Nayar said, according to a media report.
She said benefits of the healthy monsoons lie ahead, with upbeat kharif output and replenished reservoirs likely to lead to a sustained improvement in rural sentiment.
There is considerable headroom for the government’s capital expenditure, which needs to expand by 52 percent in Y-o-Y terms in H2FY25 to meet the budget estimate for the full year, Nayar added.
“We are watching the impact of a slowdown in personal loan growth on private consumption as well as geopolitical developments on commodity prices and external demand,” she said.
In Q2, investment activity improved over Q1, while remaining sluggish amid slow execution of infra projects owing to surplus monsoon rains, the agency said, adding that new project announcements witnessed a healthy rebound to Rs 6.7 lakh crore in Q2.
