Indian economy is likely to have slowed down between 6.6 to 7.1 per cent during April-June quarter of Fiscal Year 2024-25 (FY25), various agencies have estimated. The Government will make the growth number public on Friday.
Economy grew by 8.2 per cent during April-June quarter (Q1) and 7.8 per cent during January-March quarter (Q4) of Fiscal Year 2023-24 (FY24). Lower growth on yearly sequential basis is most likely on account of dip in manufacturing growth.
Earlier, this month, the Reserve Bank of India led the Monetary Policy Committee (MPC) cut the growth estimate for the first quarter by 20 basis points to 7.1 per cent, citing headwinds from softer corporate profitability, government expenditure and output from core industries. However, RBI maintained the growth forecast for full fiscal at 7.2 per cent
Key factors
In a note, Economists at HDFC Bank said they expect the GDP growth at 6.6 per cent during the first quarter. “Slowdown in GDP growth is likely to be led by moderation in manufacturing growth and government investment,” the note said. Manufacturing growth is expected to slowdown to 6.6 per cent in QI FY 25 from 8.9 per cent of Q4 FY24. While PMI manufacturing continued to exhibit strength, corporate results showed a slowdown in profit growth amid an increase in input cost pressures.
“Gross Fixed Capital Formation (GFCF) is likely to slow down in Q1 reflecting a moderation in government capital expenditure that were slow to pick up due to elections. Other investment indicators such as IIP capital goods, infrastructure goods also moderated in Q1 FY25 as compared to the previous quarter,” it said.
In its research report, SBI forecast GDP growth for first quarter in the range of 7 to 7.1 per cent with a downward bias. However, GVA was predicted to be below 7.0 per cent and in the range of 6.7-6.8 per cent, it said. Talking about manufacturing sector, the report highlighted that the indicators of corporate performance in first quarter point to moderation in sales growth of manufacturing companies in both nominal and real terms, although excluding the petroleum sector, a better outturn emerges.
Monsoon gains
“Staff costs inched up in the manufacturing sector but debt servicing capability measured in terms of the interest coverage ratio remained stable. Against this backdrop, profit margin has declined and this will pull down manufacturing growth,” the report said. Meanwhile, there could be some positive news for the farm sector because after a lackluster performance in June, South West monsoon picked up from early July, closing the deficit.
As on August 25 the cumulative rainfall was 5 per cent above the LPA as against 7 per cent below the LPA during the same period last year. Consequently, as on August 20, the total kharif sown area stood at 103.1 million hectares (94 per cent of full season normal area), which is 2 per cent higher than the corresponding period last year. “We expect agricultural growth to rebound to 4.5-5 per cent in FY25 adding around 30 bps over RBI forecast,” the report said.
