ICRA on Thursday projected India's economic growth to moderate to a six-quarter low of 6% in April-June on account of contraction in government capital expenditure and a dip in urban consumer demand. For the full fiscal 2024-25, ICRA expects GDP to grow 6.8%, lower than the 8.2% clocked in 2023-24.
"ICRA has projected the year-on-year expansion of the GDP to moderate to six-quarter low of 6% in first quarter FY2025 from 7.8% in fourth quarter FY2024, amidst a contraction in government capital expenditure and a dip in urban consumer confidence," the domestic rating agency said in a statement.
The official data for June quarter growth will be released by MoSPI (Ministry of Statistics and Programme Implementation) on Aug. 30.
The growth in the June quarter of 2023-24 was 8.2%.
ICRA Chief Economist Aditi Nayar said the June quarter of the current fiscal saw a temporary lull in some sectors due to the Parliamentary elections and sluggish government capex at both the central and state levels.
Further, she said urban consumer confidence reported a surprising downtick, as per the Consumer Confidence Survey of the Reserve Bank of India. Meanwhile, the lingering impact of last year's unfavourable monsoon and an uneven start to the 2024 monsoon prevented a broader improvement in rural sentiment.
"Lower volume growth combined with diminishing gains from commodity prices weighed upon the profitability of some of the industrial sectors.
"The heat wave also affected footfalls in various service sectors, even as it provided a significant boost to electricity demand. On balance, we foresee a transient moderation in India's GVA (Gross value added) and GDP (Gross domestic product) growth in Q1 FY25 to 5.7% and 6%, respectively," Nayar said.
For the full-year FY2025, ICRA expects a back-ended pick-up in economic activity to boost the GDP and GVA growth to 6.8% and 6.5% respectively.
In particular, there is considerable headroom for the GoI's capital expenditure, which needs to expand by 39% in YoY terms in July-March FY2025 to meet the Budget estimate for the full year. This is expected to catapult GDP growth back above 7% in the second half of FY2025, Nayar added.
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