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Anand Rathi Report
Gross domestic product for Q2 FY25 came in at5.4%, below our projected 6.7%, with growth in consumption and investments moderating, compared to the previous quarter. Considering the unexplained part of the GDP i.e., the discrepancies, the net effect of growth would have been 7.5% YoY.
Investment growth moderated partly due to elevated interest rates and excess rainfall in a few parts of the country, thus, impacting normal activities. While investment in roads, Railways and Defence remained resilient, commencement of projects was delayed due to excess rains. Also, funding was delayed in government projects, as the full budget was announced and approved only in the last week of July.
While consumption growth moderated on a sequential basis, annual growth picked up to 6%, compared to 2.6% last year.
We believe that consumption growth should be strong in H2 FY25, driven by continued strength in agriculture, which is expected to boost rural demand further.
Also, the government is expected to increase spending in welfare schemes; this is likely to support demand. Meanwhile, government consumption growth stood at a four-month high. Capex is likely to be strong in H2, with only a few months left to meet the annual target. A potential rate cut is further likely to support investment and demand.
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