RBI Bulletin: Nowcast Model Forecasts Q3 GDP Growth At 6.2%; Uptick Seen In Second Half Of FY25

The Reserve Bank of India's nowcast model forecasts a gross domestic product growth of 6.2% in the December quarter of fiscal 2025, as per the monthly bulletin released by the central bank on Friday.

The central bank also sees a recovery in economic growth in the second half of the ongoing fiscal, after a slowdown experienced in the first half, according to the bulletin.

Notably, the GDP grew at 5.4% in the second quarter—the lowest pace in seven quarters, led by slower growth across the industrial sector. However, economic growth is "poised to rebound" as domestic demand regains strength, the RBI said.

Rural demand continues to gain momentum, reflecting a resilience in consumption, supported by brighter agricultural prospects, it said, adding that a revival in public capex on infrastructure is likely to stimulate growth in key sectors.

The RBI, however, noted that rising input cost pressures in the manufacturing sector, coupled with weather-related exigencies and global headwinds could pose risks to this outlook.

RBI Bulletin: Key Highlights

In India, there is a conducive quickening of high frequency indicators of economic activity in the second half of fiscal 2025, "bearing out the implicit pick up in real GDP growth for this period in the annual first advance estimates of the NSO", it stated.

The bulletin pointed out that headline inflation eased for the second successive month in December, although the stickiness in food inflation warrants careful monitoring of second order effects.

"The time is apposite to rekindle the animal spirits, create mass consumer demand and trigger a boom in investment," the bulletin stated.

There are early indications that corporate India may post a much better revenue and earnings growth in the third quarter as compared to the first half of fiscal 2025, it said.

According to estimates by various brokerages, the combined net profit of Nifty 50 companies may grow at its fastest rate in three quarters, it stated. "Banking, finance and insurance companies are again expected to report better earnings."

"It is also believed that unlisted companies are likely to outpace their listed counterparts with faster revenue growth," it added.

The RBI bulletin also noted that private final consumption is the "brightening spot" in the economy, driven by e-commerce and quick commerce. It is important to "foster competition" in these segments, rather than being restrictive, it added.

"One way to revive the animal spirits may be to provide a consumption boost," it said, while pointing out that the demand for household staples has seen a modest rise in the October-December quarter.

In the housing space, the mid-income segment and premiumisation are fuelling demand and leading to overall improvement in market health metrics, the bulletin further said.