New Delhi, Nov 20 (FN Bureau) Research and rating firm ICRA on Wednesday projected India’s GDP growth to slow down to 6.5% in July-September quarter (Q2) of current financial year 2024-25 (FY25) due to factors like heavy rains and weak corporate margins. Ministry of Statistics & Programme Implementation (MoSPI) will release the GDP estimates for the September quarter on November 29, 2024. In its estimate, ICRA said that while government spending and kharif sowing have shown positive trends, the industrial sector, particularly mining and electricity, is expected to slow down. It further said that despite these challenges the services sector is projected to improve, and a back-ended recovery is anticipated, leading to a full-year GDP growth of 7%.
“However, risks such as a slowdown in personal loan growth and geopolitical uncertainties remain,” it said. As per ICRA, the growth in the gross value added (GVA) is estimated to ease to 6.6% in Q2FY25 from 6.8% in Q1FY25, driven by the industrial sector, amid a pick-up in the expansion in services and agricultural GVA. “Based on available data for the Centre and the states’ indirect taxes and subsidies, ICRA estimates that the growth in net indirect taxes (in nominal terms) rose slightly to 9.0-9.5% in Q2 FY2025 from 8.0% in Q1 FY2025. Given this, the GDP-GVA growth wedge (in real terms) is expected to remain inverted in Q2 FY2025 as well,” it said. Aditi Nayar, Chief Economist, Head-Research & Outreach, ICRA said that Q2 FY2025 saw tailwinds in terms of a pick-up in capex after the Parliamentary elections as well as healthy expansion in sowing of major kharif crops.
“Several sectors faced headwinds on account of heavy rainfall, which affected mining activity, electricity demand and retail footfalls, and a contraction in merchandise exports. Further, margins appear to have weakened for corporates in a variety of sectors in this quarter. As a result, we project a slight dip in India’s GVA and GDP growth in Q2 FY2025 to 6.6% and 6.5%, respectively,” she said. ICRA estimates the industrial GVA growth to record a broad-based moderation to 5.5% in Q2FY25 from 8.3% in Q1FY25, led by electricity (to +2.0% from +10.4%), mining and quarrying (to +1.5% from +7.2%), manufacturing (to +5.5% from +7.0%), and construction (to +7.0% from +10.5%).