The National Statistical Office is expected to release the GDP data for July-September on November 29, at 1600 IST. Estimates of GDP growth for July-September range from 6.2 to 6.99 per cent.
The slow pace of industrial growth in July-September was likely due to the prolonged rains, especially in the manufacturing, mining, and electricity sectors. This, combined with tepid consumer growth in urban areas has led to a lower economic growth rate. According to the median estimate of 12 economists, real Gross Domestic Product (GDP), which will be released Friday, growth is expected to slow down in Q2 from 6.7% in April-June, and 8.1% a year earlier, to a six quarter low of 6.5 %.
Capital expenditures have remained lower than the levels of the previous year for both the states and the Centre. This has added to concerns about a slowdown in growth. The agricultural sector is seen as the brightest spot among all sectors with good kharif production estimates and a rebound in rural demand.
We expect agriculture GDP will rise to a 6-quarter-high of 6.0 percent, due to elevated kharif production estimates. According to IIP data, industrial growth is slowing down, especially in mining, electricity and gas. Manufacturing GDP may also be moving sideways, registering a growth of 6.0 percent YoY. Construction growth will likely drop to 6.0 percent from 10.5 percent YoY in Q2 24 as steel production growth declines and cement grows slightly.
The growth of services is expected to slow down largely because of a decline in credit growth. This has been slowed considerably in the last few months," Rahul Bjoria said, India and ASEAN economic analyst at Bank of America.
The National Statistical Office is expected to release the GDP data for July-September on November 29, at 1600 IST. Estimates of GDP growth for July-September range from 6.2 to 6.99 per cent.
Sonal Varma is Nomura's Chief Economist for India and Asia Ex-Japan. She said that a sharper decline in exports as opposed to imports also weighs on Q2 growth. The drag is estimated at 1.1 percentage points, compared with 0.7 percentage points in Q1.
On the supply side, GVA growth is expected to slow to 6.8% YoY from 6.8% in Q1, as growth in the construction and industrial sectors eases. We expect that agricultural growth will pick up. "Financial and real estate" and "professional services" will continue to grow strongly. And we are working to build in a recovery for the "trade, hotel, transport, and communication" sector, which was previously lagging. We believe India is in a cyclical slowdown and see increasing downside risks in our GDP baseline projections for FY25 (6.8% YoY) and FY26 (6.8% YoY).
Reserve Bank of India has projected GDP growth rates for FY25 and FY26 at 7.2% and 7.1% respectively. Ajay Ajay Seth, Economic Affairs secretary, said last week that there was "no significant risk" of the 6.5-7 percent growth projection in the current financial year 2024-25 as detailed in Economic Survey despite the likely slowdown for the September quarter.
Future Growth Prospects
The slow pace of capital expenditure by the states and the Centre is a major concern. However, the rural demand and the agricultural growth are expected to support growth in the future. Capex will likely fall short of the Rs 11.11 lakh target for FY25. According to rough estimates, the Centre's capex may be about Rs 55.555 crore below the target. In the second half, the Centre will need to increase its capex by 52% to reach the FY25 Budget Target of Rs 11,11 lakh crore. The second half is a challenge for the Centre, as it will have to increase its capex by 52 per cent in order to reach the FY25 budget target of Rs 11.11 lakh crore.
Economic Affairs Secretary Ajay Seth: 'No significant downside risk' to growth despite likely slowdown in Sept quarter
In a recent note, HDFC Bank Treasury Research stated that economic indicators in October have already shown a positive change in the overall economy. This includes improvements in multiple sectors, including manufacturing and service Purchasing Managers’ Indices (PMI), as well as GST collections, toll revenue, and e-way bills. It said that the demand-side dynamics showed rural demand now starting to surpass urban demand. We have seen a dramatic increase in agriculture and services. This bodes well for future growth. Other sectors, except for oil and gas, have done better. GST (Goods & Services Tax) and automobile sales show that consumption has increased. The inflation should also be expected to decrease from December. Madan Sabnavis is the chief economist at Bank of Baroda. He estimates that FY25 GDP will grow by 7.3-7.4 percent.
Rajani Sinha is the chief economist at CareEdge Ratings. She said that a rebound in government spending will boost growth potential for H2. This recovery will support both the capex demand and private consumption. The Rabi sowing season is expected to be successful as reservoir levels are still comfortable in many regions. "A good kharif harvest, coupled with an improved outlook for rabi sowing bodes well for rural demand," Sinha said.
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