Mumbai, Nov 20 – Domestic rating agency ICRA on Wednesday revised India’s GDP growth forecast for the September quarter, projecting a decline to 6.5% due to heavy rainfall and weaker corporate performance. However, it maintained its full-year estimate for FY25 at 7%, anticipating a recovery in economic activity during the second half of the fiscal year.
ICRA’s updated outlook comes amidst growing concerns over a potential growth slowdown, with factors such as slowing urban demand and weaker corporate margins weighing on the economy. Despite these concerns, the Reserve Bank of India (RBI) has retained its 7.2% GDP growth projection for FY25, though most analysts expect growth to fall below 7%. Official Q2 data will be released on November 30; the economy had expanded by 6.7% in Q1.
ICRA attributed the anticipated dip in Q2 growth to factors like severe monsoon rains, weak corporate margins, and slower industrial output, particularly in the mining and electricity sectors. While government spending and a strong kharif sowing season showed positive trends, the industrial sector faced headwinds.
The services sector, however, is expected to see improvement, contributing to a back-ended recovery and a projected full-year GDP growth of 7%. ICRA’s chief economist, Aditi Nayar, noted that while several sectors faced challenges due to the rains, including mining and retail, the monsoon’s positive impact, such as a bumper kharif crop and replenished reservoirs, is expected to support rural sentiment in the coming months.
Nayar also highlighted that the government’s capital expenditure is expected to rise in the second half of FY25, with a 52% year-on-year increase required to meet the full-year budget estimate.
While investment activity showed signs of improvement in Q2, the execution of infrastructure projects remained sluggish due to the monsoon. However, new project announcements surged to Rs 6.7 lakh crore in Q2, signaling a potential rebound.
ICRA remains cautious about the impact of slower personal loan growth on private consumption and the potential effects of geopolitical developments on commodity prices and external demand.
