India Q1 FY25 GDP Data Highlights: Indian economy hits 15-month low of 6.7% in June quarter

Suman Chowdhury, Executive Director and Chief Economist, Acuité Ratings & Research:

“Expectedly, GDP growth in Q1FY25 at 6.7% is largely in line with market expectations albeit it is slightly higher than our forecasts. The gap between GVA and GDP growth has narrowed significantly due to higher subsidies payouts in the first quarter of the year. At 6.8% YoY, GVA growth is 50 bps higher than what had been reported in Q4FY24 and is clearly a confirmation of the continuing momentum in the general economic activity. 

In particular, growth in the construction sector at 10.5% YoY has surprised on the upside given the expectation that the sector typically slows down during the election period. We had expected a recovery in private consumption based on a pickup in rural demand manifested through high frequency indicators such as 2W sales but the extent is higher than our expectations at 7.4% YoY. 

Further, agriculture sector growth has picked up to 2% which is likely to grow further in the subsequent quarters. The growth in exports has also been higher at 8.7%, supporting the healthy GDP growth.

We continue to forecast an annual GDP growth of 6.8% for FY25. Government capital expenditure will continue to be a major pillar of such growth as in the previous year; at the same time, higher growth in private consumption from the rural sector is likely to augment the growth figure.”

Despite strong growth relative to other economies, India faces challenges in job creation and more inclusive economic growth. These issues have affected real wages, household consumption among lower-income groups, and private investments.

The government has stepped up spending with last month's $576 billion annual budget, which includes billions of dollars for affordable housing and rural jobs, to stimulate economic activity.

Consumer spending, which constitutes about 60% of GDP, rose 7.4% in April-June from a year earlier, compared to 4% in the previous quarter. Capital investments also rose by 7.4% compared to 6.5% in the previous quarter.

Economists anticipate that easing retail inflation could lead the central bank to cut its policy rate later this year, potentially boosting household consumption and supporting private investments.

Sujan Hajra, Chief Economist & Executive Director, Anand Rathi Shares and Stock Brokers:

‘’India's GDP growth for the quarter ending June 2024 came in at 6.7%, slightly below expectations and 1.5 percentage points lower than the growth rate during the same quarter last year. Despite this slowdown, the underlying data presents a positive outlook, with a notable increase in private consumption and a modest improvement in investment activity. 

The lower growth rate can be attributed to a high base effect, adverse weather conditions, and restrictions on government activities due to the code of conduct during the general elections. Additionally, unlike the previous quarter, the unexplained component of GDP acted as a drag rather than a boost to growth.

Looking ahead, we anticipate full-year GDP growth for the current financial year to align closely with our estimate of 7%. This robust growth, coupled with falling inflation, is expected to support continued outperformance in the Indian equity market. However, the strong growth figures may prompt the Reserve Bank of India (RBI) to maintain the current monetary policy rates throughout 2024.''

The Centre's fiscal deficit at the end of the first four months of the current fiscal touched 17.2 per cent of the full-year target, government data showed on Friday. In absolute terms, the fiscal deficit -- the gap between expenditure and revenue -- was ₹2,76,945 crore as of July-end, according to data released by the Controller General of Accounts (CGA).

The deficit stood at 33.9 per cent of the Budget Estimates (BE) in the corresponding period of 2023-24.  In Budget 2024, the government projected to bring down the fiscal deficit to 4.9 per cent of the gross domestic product (GDP) in the current 2024-25 financial year. The deficit was 5.6 per cent of the GDP in 2023-24.

"Real GDP or GDP at Constant Prices in Q1 of 2024-25 is estimated at ₹43.64 lakh crore against ₹40.91 lakh crore in Q1 of 2023-24, showing a growth rate of 6.7 per cent," NSO said in a statement.

It further stated that nominal GDP or GDP at current prices in Q1 of 2024-25 is estimated at ₹77.31 lakh crore against ₹70.50 lakh crore in Q1 of 2023-24, showing a growth rate of 9.7 per cent. As per the data, the output (GVA) in the 'mining and quarrying' accelerated to 7.2 per cent in the first quarter from 7 per cent a year ago.

Electricity, gas, water supply and other utility services grew by 10.4 per cent from 3.2 per cent. The construction segment also grew by 10.5 per cent from 8.6 per cent a year ago. Trade, hotels, transport, communication and services related to broadcasting slowed to 5.7 per cent from 9.7 per cent a year ago.

"The higher-than-expected growth in the GVA in Q1 FY25, as well as the acceleration in the same vis-a-vis Q4 FY24 was largely led by construction, public administration, defence and other services, and agriculture segments.

Arsh Mogre, Economist Institutional Equities, PL Capital - Prabhudas Lilladher says election disruptions and heat wave take toll on Indian economy

“India’s GDP growth decelerated to 6.7% in Q1 FY25, marking a five-quarter low and reflecting a noticeable slowdown from 7.8% in Q4 FY24. Private consumption, a key driver of the economy, showed resilience, growing by 7.44% YoY, reflecting solid consumer demand. However, government expenditure contracted by 0.24% YoY. This moderation in growth is largely attributable to a combination of factors, including election-related disruptions and extreme summer conditions, which impacted economic activities across several sectors.

The slowdown was also evident in the Industry GVA, which dipped marginally to 8.33% YoY from 8.43% YoY in the previous quarter. The industrial sector faced profitability pressures due to rising input costs, which likely curbed manufacturing output. However, the narrowing gap between GDP and GVA growth to just 10 basis points—down from approximately 150 bps in Q4 FY24—indicates a closer alignment between value addition and overall economic output, a positive signal amidst the moderation.

Despite the moderation in the previous quarter, India maintains its position as the fastest-growing major economy, outpacing China’s 4.7% GDP growth in the same quarter. This resilience underscores India’s robust macroeconomic fundamentals. Looking ahead, there are promising signs for recovery in the coming quarters. An improved monsoon is expected to boost rural demand, while public and private capital expenditure is anticipated to gain momentum with stable policy continuity in sight”.

At 6.7 per cent, the GDP growt was the slowest pace in five quarters and below the central bank’s projection of 7.1 per cent for the period. The economy grew 7.8 per cent in the January-March quarter.

The data comes against the backdrop of rising economic risks, which have prompted some economists to downgrade their full-year projections and call on the central bank to begin cutting interest rates. 

The agriculture sector recorded a two per cent growth, down from 3.7 per cent in the April-June quarter of 2023-24, as per the National Statistical Office (NSO) data released on Friday.

However, the growth in the manufacturing sector accelerated to 7 per cent in the first quarter of the current fiscal compared to 5 per cent in the year-ago period. The previous GDP low was 6.2 per cent in January-March 2023.

India's gross domestic product slowed to a quarter low of 6.7 per cent in April-June this fiscal against 8.2 per cent in the year-ago period, mainly due to poor showing by the farm sector, according to government data. India remains the fastest-growing major economy, as China's GDP growth in the April-June quarter was 4.7 per cent.

Indian stock market benchmark Nifty 50 hit a fresh record high and continued its upward march for the 12th consecutive session on Friday, August 30, amid positive global cues. The 30-share pack Sensex, too, rose to a record high, and on the monthly scale, both indices rose for the third consecutive month. 

On a monthly scale, the Nifty 50 rose 1.1 per cent, and the Sensex climbed 0.80 per cent, extending the gains into the third consecutive week. Year-to-date, the Nifty 50 is up 16 per cent, while the Sensex has gained 14 per cent.

On the last trading day of the month, the Nifty 50 hit its fresh record high of 25,268.35, while the Sensex also scaled a fresh peak of 82,637.03 during the session. The Sensex finally closed 231 points, or 0.28 per cent, higher at 82,365.77, while the Nifty 50 settled 84 points, or 0.33 per cent, higher at 25,235.90. This was the fresh closing high for both indices.

Mid and smallcaps indices outperformed the benchmarks. The BSE Midcap index rose 0.50 per cent, while the Smallcap index climbed 0.73 per cent. The overall market capitalisation of the firms listed on the BSE rose to a record near ₹464.4 lakh crore from nearly ₹462.6 lakh crore from the previous session, making investors richer by about ₹2 lakh crore in a single session.

The growth in production of eight key infrastructure sectors slowed down to 6.1 per cent in July this year due to a decline in the output of crude oil and natural gas, according to official data released on Friday.

The growth rate, however, is up from 5.1 per cent in June. The growth of core sectors -- coal, crude oil, natural gas, refinery products, fertiliser, steel, cement and electricity -- was 8.5 per cent in July 2023.

During April-July this fiscal, the output of core sectors rose by 6.1 per cent against 6.6 per cent in the same period last fiscal. The eight core sectors contribute 40.27 per cent to the Index of Industrial Production (IIP) which measures overall industrial growth. Crude oil and natural gas output contracted by (-) 2.9 per cent and (-) 1.3 per cent, respectively, in July.

Goldman Sachs Group Inc. has lowered India’s growth forecast by 20 basis points each for this year and the next, citing a contraction in central government expenditure. The bank now expects the nation’s economy to expand at 6.7% in calendar 2024, and 6.4% in 2025. 

The current year’s downgrade factors a 35% year-on-year contraction in government expenditure during the April-June quarter that coincided with the weeks-long general election, the US bank’s economist led by Santanu Sengupta wrote in a report Friday.

India’s growth next year will be hampered by the government’s commitment in the budget to bring down the fiscal deficit to below 4.5% of gross domestic product. Expansion will also face headwinds from slower real consumption growth, driven by a slowdown in household credit due to the Reserve Bank of India’s stricter rules to control unsecured lending by banks, the economists said.

Soumya Kanti Ghosh, Group Chief Economic Advisor at State Bank of India forecasted GDP growth for Q1FY25 to be 7.0% - 7.1%, and GVA at 6.7% - 6.8% with a downward bias. He believes profit margins of India Inc have declined which will pull down manufacturing growth. He expects agricultural growth to rebound to 4.5% - 5% in FY25 adding around 30 bps over RBI forecast.

“The global economic growth outlook remains uncertain but the softening inflation has made space for monetary policy easing. The indicators of corporate performance in Q1 2024-25 point to moderation in sales growth of manufacturing companies in both nominal and real terms, although excluding the petroleum sector, a better outturn emerges,” Ghosh said.

India’s economic growth is expected to have slowed down to a five quarter low of 6.5% in the first quarter of FY25, below the RBI's recent projections, amid a contraction in government capital expenditure due to elections and the impact of summer heatwaves on some sectors of the economy, according to economists. The gross domestic product (GDP) growth is estimated to be in the wide range of 6% to 7% in Q1FY25 as against GDP growth of 8.2% in Q1FY24 and 7.8% in Q4FY24.

The Reserve Bank of India (RBI) in its August monetary policy had revised downwards India’s growth forecast for April-June quarter by 20 bps to 7.1% on account of muted government capex, lower corporate profitability and lower core output.

“The general momentum of domestic economic activity has witnessed some moderation in the first quarter of the fiscal, with some high frequency indicators indicating an adverse impact of the general elections along with the excessive summer heat conditions in some sectors of the economy. Lower growth in industrial output along with lower than expected profitability may translate to weaker GVA growth in the manufacturing sector,” said Suman Chowdhury, Executive Director and Chief Economist, Acuité Ratings & Research.

Chowdhury estimates a moderation in GVA and GDP growth to 6.0% and 6.4% respectively in Q1FY25. He believes a partial recovery in rural demand during the quarter is likely to lead to a better growth in private consumption. His full year GDP growth forecast stands at 6.8%.

India's gross domestic product (GDP) growth is expected to moderate to 6%—a six-quarter low—during the three months ended 30 June 2024 due to a dip in government capital expenditure and urban consumer confidence, rating agency Icra said on Thursday.

India's GDP grew 7.8% during the three months ended 31 March 2024 (Q4FY24) and 8.2% during the year ended 31 March 2024 (FY24). The Reserve Bank of India has forecast real GDP growth of 7.2% for FY25.

The gross value added (GVA) growth is estimated to ease to 5.7% in the June quarter from 6.3% in the March quarter, according to Icra. This is because the industrial sector growth is expected to decline to 6.4% in the first quarter of FY25 from 8.4% in the fourth quarter of FY24. Even the expansion of the services sector is expected to ease to 6.5% from +6.7% in the previous quarter.

Meanwhile, the rating agency expects a slight pick-up in the agricultural GVA growth to 1% from 0.6% in the previous quarter. GVA is an economic metric that measures the value of goods and services produced in an economy.

India's economic growth may have slowed to 6.85% in April-June from 7.76% in the previous quarter, according to a median estimate from 25 economists polled by Mint. The slowdown is attributed to a lack of economic momentum during the general elections, muted government capital expenditure, and an uneven monsoon. If these projections hold, it would mark the lowest GDP growth in five quarters. Economists have projected GDP growth in the range of 6.0-7.3% for the quarter.

Moody's on Thursday revised India's economic growth forecast upwards to 7.2% for 2024 and to 6.6% for 2025 from its earlier estimates of 6.8% and 6.4%, respectively, citing strong broad-based growth.

The New York-based rating company said it recognised potentially higher growth forecasts for India if the cyclical momentum, especially for private consumption, gains more traction.

"The (Indian) economy expanded 7.8% year-over-year in the first quarter of 2024 despite the persistence of tight monetary policy and demonstrated progress on fiscal consolidation. Both the industrial and services sectors have recorded strong performances, with the services PMI in particular remaining above 60 since the beginning of the year," Moody’s said in a report titled 'Global Macro Outlook 2024-25 (August 2024 Update).'

According to the Reserve Bank of India (RBI), the real gross domestic product (GDP) growth for 2024-25 is projected at 7.2 per cent, with Q1 at 7.1 per cent, Q2 at 7.2 per cent, Q3 at 7.3 per cent, and Q4 at 7.2 per cent.

The International Monetary Fund upgraded India's GDP growth in the ongoing fiscal (FY25) by 20 basis points to 7% in July. The World Bank in June upwardly revised the country's growth forecast for the current financial year by 20 basis points to 6.6%, citing strong growth momentum for the South Asian nation.

India's GDP growth in the preceding January-March quarter of fiscal 2023-24 (Q4FY24) came in at 7.8 per cent, driven by strong growth in the manufacturing sector. The Indian economy beat D-Street estimates and grew by 8.2 per cent for the full year (FY24). Economists expect the momentum to remain strong this year.

According to data released by the National Statistical Office (NSO), the sector-wise analysis revealed that the real gross value added (GVA) grew at a rate of 7.2 per cent in 2023-24, compared to the 6.7 per cent growth observed in 2022-23. The growth propelled the Indian economy to $3.5 trillion and set the stage for achieving the $5-trillion target in the next few years.

Industrial activity grew 9.5 per cent in FY24, led by construction and manufacturing. In Q1 FY25, growth drivers are shifting toward utilities/mining, with manufacturing growth slowing. Utilities GVA is expected to rise 11.5 per cent, while construction has slowed due to election-related disruptions and the heat.

Growth in FY24 was investment-driven, spurred by government infrastructure projects and a real-estate upswing. However, the momentum slowed in Q1 FY25 due to pre-election restrictions. With greater budget allocations, government capex is expected to rise significantly in the coming months.

‘’Stamp duty collections have also rebounded, suggesting buoyant real estate sales, and private capex, previously subdued, is expected to expand in FY25, supported by rising capacity utilisation and strong order books,'' said Anand Rathi.

India's gross domestic product (GDP) for the April-June quarter of fiscal 2024-25 (Q1FY25) is likely to moderate to seven per cent on softer government spending; however, the services sector growth is pegged at 8.2 per cent. According to domestic brokerage Anand Rathi, reduced government spending ahead of the general elections likely dulled growth in some services in Q1 FY25.

‘’Financial, real estate, and professional services are expected to have done well due to strong market activity and credit growth. The trade and transport sectors show mixed signals, with some indicators improving and others moderating. Services GVA is expected to grow 8.2 per cent in Q1 FY25,'' said Sujan Hajra, Chief Economist & Executive Director, Anand Rathi Shares and Stock Brokers.