India GDP growth: Economy grew at at 6.7% in the April-June quarter in FY25, lower than 7.8% in FY24

India’s economy  grew at 6.7% in the April-June quarter of FY25 over the growth rate of 8.2% in Q1 of FY 2023-24. This figure reflects a deceleration from the 7.8% growth seen in the previous quarter of FY24 and 8.2% in the corresponding period last year.

“Real GDP has been estimated to grow by 6.7% in Q1 of FY 2024-25 over the growth rate of 8.2% in Q1 of FY 2023-24,” the finance ministry said in a statement.

The latest National Statistical Office (NSO) data stated India’s gross value added or GVA, which is GDP minus net product taxes and reflects growth in supply, also grew 6.8 per cent during April-June 2024.

The Reserve Bank of India’s forecast was 7.1% growth in the first quarter. Analysts predicted growth in the range of 6%-7.1% for Q1 FY25, compared with 7.8% in the previous quarter (Q4 FY24). ICRA anticipated a 6% growth, while State Bank of India (SBI) and Anand Rathi Research expected a growth rate of 7.1% and 7%, respectively. Acuite Ratings & Research forecasts a 6.4% growth, and the Reserve Bank of India (RBI) also projects a 7.1% increase in GDP for the April-June 2024 quarter.

Other highlights:

> Nominal GDP has witnessed a growth rate of 9.7% in Q1 of FY 2024-25 as compared to the growth rate of 8.5% in Q1 of FY 2023-24.
> Real GVA has grown by 6.8% in Q1 of FY 2024-25 over the growth rate of 8.3% in Q1 of the previous financial year. This GVA growth in the Q1 of FY 2024-25 has been driven by significant growth in the Secondary Sector (8.4%), comprising of Construction (10.5%), Electricity, Gas, Water Supply & Other Utility Services (10.4%) and Manufacturing (7.0%) sectors.
> Growth rate in Nominal GVA for Q1 of FY 2024-25 have been estimated at 9.8% over 8.2% growth rate in Q1 of FY 2023-24.
> Private Final Consumption Expenditure (PFCE) and Gross Fixed Capital Formation (GFCF), at Constant Prices, have witnessed growth rates of 7.4% and 7.5% respectively in Q1 of FY 2024-25.
> Net Taxes, at current prices, has observed the growth rate of 8.0 % in Q1 of FY 2024-25 resulting in 0.1% point gap between the growth rates of GVA and GDP.

The central bank, in its August monetary policy statement, revised India’s growth forecast for the April-June quarter downwards by 20 basis points to 7.1 per cent. This adjustment was made due to factors such as subdued government capital expenditure, decreased corporate profitability, and lower core output. Despite this revision, the central bank has maintained the full-year FY25 GDP growth estimates at 7.2 per cent.

RBI Governor Shaktikanta Das mentioned in the most recent minutes of the Monetary Policy Committee (MPC) meeting that the acceleration of agricultural activity is anticipated to further bolster rural consumption. Additionally, there is a notable increase in private corporate investment, as evidenced by capacity utilisation hitting its highest level in 11 years.

“India’s GDP growth expectedly slowed down in Q1 FY2025 relative to Q4 FY2024 (to a five-quarter low of 6.7% from 7.8%), even as the GVA growth surprisingly accelerated between these quarters (to 6.8% from 6.3%). This divergent trend was led by the normalisation of the growth in net indirect taxes, and the slowdown in the GDP growth is not a cause for alarm, in our view. The higher-than-expected growth in the GVA in Q1 FY2025, as well as the acceleration in the same vis-à-vis Q4 FY2024, was largely led by construction, public administration, defence and other services, and agriculture segments. The acceleration in the construction GVA growth, to 10.5% in Q1 FY2025 from 8.7% in Q4 FY2024, is particularly surprising given that the volume growth in construction-related indicators such as cement and steel output, or infra/construction goods output from the IIP, had slowed between these quarters. Besides, the capex of the Centre and the states had also contracted quite sharply in Q1 FY2025,” said Aditi Nayar, Chief Economist, Head – Research and Outreach, ICRA Ltd.

She added: “On the expenditure side, the acceleration in the PFCE, to a seven-quarter high of 7.4% in Q1 FY2025 from 4.0% in Q4 FY2024, is quite surprising given the moderation in urban consumer sentiments and the impact of heatwave in parts of Q1 which affected footfalls in certain retail-focused sectors such as sales of passenger vehicles, hotel occupancy rates, etc. Notwithstanding some green shoots, rural demand is expected to have remained uneven in the quarter, amidst the spillovers of the impact of the poor monsoon in the preceding year. The acceleration in the GFCF growth, to 7.5% in Q1 FY2025 from 6.5% in Q4 FY2024, is also at odds with most high frequency indicators related to government and private capex. We anticipate a back-end pickup in the GDP growth to above 7% in H2 FY2025, boosted by factors such as Government capex and pent-up rural demand during the festive months.”

“While the 1QFY25 GDP growth has come in softer than expectations, the GVA has remained firm, with non-farm growth holding up well. We retain our GDP growth expectations of 6.9% in FY2025, aided largely by rural demand and government spending while watching closely the likely fatigue in urban demand, private capex and pace of global slowdown,” said Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank.