GDP: India’s growth rate may be 6.5 percent in September quarter
New Delhi| Domestic rating agency ICRA on Wednesday predicted that India’s real GDP growth rate may decline to 6.5 percent in the September quarter due to heavy rains and weak performance of companies in quarterly results. However, the agency has maintained the growth rate estimate for FY2025 at 7 percent, due to expectations of a pick-up in economic activity in the second half of the fiscal year. This comment of ICRA has come at a time when concerns about slowdown in growth are being expressed due to many factors like decline in urban demand.
RBI stands by its estimate of 7.2 per cent growth for the current financial year. However, most analysts estimate that the ageing rate could remain below 7 per cent. In the last few weeks, many analysts have talked about reducing the growth rate estimates. Official figures for second-quarter economic activity are expected to be published on 30 November. The GDP growth rate in the first quarter was 6.7 per cent.
ICRA said the decline in growth rate in the second quarter will be due to factors like heavy rains and weak corporate margins. “Government spending and kharif sowing have shown positive trends, but a slowdown is expected in the industrial sector, especially the mining and power sectors”, the report said.
The services sector is projected to improve over the previous year, with GDP growth projected at 7 percent for the year as a whole, the report said. Chief Economist Aditi Nair said, “The second quarter of FY2025 showed good growth in sowing of major kharif crops along with increase in capital expenditure after parliamentary elections”. Many regions faced adverse conditions due to heavy rainfall, which affected mining activity, electricity demand and the number of retail customers and also reduced merchandise exports
She said that good monsoon will be beneficial in future, and the increase in Kharif production and replenishment of reservoirs is likely to continuously improve rural sentiment. Nair said there is ample scope for the Indian government’s capital expenditure, which needs to increase by 52 per cent on a year-on-year basis in the second half of FY2025 to meet the full-year budget estimate.
“We are also monitoring the impact of the slowdown in personal credit growth on private consumption, as well as the impact of geopolitical developments on commodity prices and external demand”, Nair said.
According to the agency, the slowdown was due to slow implementation of infrastructure projects due to additional rains in monsoon. However, investment activity in the second quarter was better than in the first quarter. The agency said the second quarter saw a good increase of Rs 6.7 lakh crore in announcements related to new projects.
