india-s-gdp-growth-likely-to-slow-to-6-5-pc-in-q2-icra

Domestic rating agency Icra said on Wednesday that India's real GDP growth in the September quarter is expected to fall to 6.5 percent due to heavy rains and worse corporate performance.

 

However, the agency maintained its FY25 growth prediction of 7%, citing prospects of increased economic activity in the second half of the fiscal year.

 

The estimates and discussion on the prognosis come at a time when there are concerns about the slowdown in growth due to a variety of issues, including weakening urban demand.

 

The RBI is sticking to its projection of 7.2 percent growth for the fiscal, but a majority of analysts predict it to be less than that figure, and many have been adjusting downward in the last few weeks.

 

Official data for Q2 economic activity are likely to be released on November 30. In the first quarter, GDP expanded by 6.7%.

 

Icra stated that the drop in Q2 will be attributable to factors such as excessive rainfall and low corporate profits.

 

"While government spending and kharif sowing have shown positive trends, the industrial sector, particularly mining and electricity, is expected to slow down," according to the statement.

 

The services sector is expected to improve, with a back-ended rebound leading to 7% annual GDP growth, it added.

 

"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," its chief economist Aditi Nayar said.

 

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 GoI's capital expenditure, which needs to expand by 52 percent in Y-o-Y terms in H2 FY2025 to meet the budget estimate for the full year, Nayar added.

 

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.