Statsguru: India's GDP growth likely to ease; demand remains weak

India’s economic growth slowed in the April-June quarter of the current financial year (Q1FY25) compared to that in the fourth quarter of the previous year on a high base, according to estimates from various agencies.

The Reserve Bank of India (RBI) has predicted  7.1 per cent growth for the first quarter, higher than the estima­tes from S&P Global Market Intelligence, ICRA, Quanteco Research, CRISIL, Nomura, and CareEdge Ratings. How­ever, India Ratings and Bank of Baroda have pr­o­je­cted a higher growth rate than the RBI, while Barclays  has projected the same rate (chart 1).

There is a wide difference between the gross domestic product (GDP) and gross value added (GVA) growth rates. The gap widened to 1.5-1.8 percentage points in the third and fourth quar­ters due to rising goods and services tax (GST) and a decline in subsidies (chart 2).

The GDP numbers for Q1FY25 will be released later this week.

Even if India’s GDP growth rate decreases in the first quarter, it will remain the fastest-growing large economy in the world. For comparison, the growth rates of the top five economies in the world are given (chart 3).

While services have remained the dominant contri­butor to GVA, the industrial sector has been gaining momentum in recent quarters (chart 4).

However, inve­st­­m­ent remains a key concern area. The growth rate in gross fixed capital formation may further slow down in Q1FY25 due to the model code of conduct, which was in force at the time of the Lok Sabha elections (chart 5).

Private final consumption expenditure, denoting demand in the economy, also decelerated moderately in Q4FY24 compared to that in the previous quarter (chart 6).

The finance ministry remains optimistic about achieving the projection given by the Economic Survey for GDP growth— in the range of 6.5-7 per cent for FY25.