India's GDP growth slowed down to six-quarter low of 6% in Q1 FY25: ICRA

The credit rating agency expects India's GDP to grow by 6.8 per cent for the full fiscal year 2024-25, lower than the 8.2 per cent achieved in 2023-24

A contraction in government capital expenditure and a dip in urban consumer demand slowed down India’s GDP growth to a six-quarter low of 6 per cent in April-June, ICRA said on Thursday.

The credit rating agency added that it expects the country’s GDP to grow by 6.8 per cent for the full fiscal year 2024-25, lower than the 8.2 per cent achieved in 2023-24.

“ICRA has projected the year-on-year expansion of GDP to moderate to a six-quarter low of 6 per cent in Q1 FY2025 from 7.8 per cent in Q4 FY2024, amidst a contraction in government capital expenditure and a dip in urban consumer confidence,” the domestic rating agency said in a statement.

 

The estimates come days before the Union Ministry of Statistics and Programme Implementation is expected to release the official growth figures for the June quarter (Q1) on August 30. Growth in the corresponding quarter of 2023-24 was 8.2 per cent.

The June quarter of the current fiscal year saw a temporary lull in some sectors due to the Parliamentary elections and sluggish government capital expenditure at both the central and state levels, said ICRA Chief Economist Aditi Nayar, according to a PTI report.

She said that 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 industrial sectors. The heatwave also affected footfalls in various service sectors, even as it provided a significant boost to electricity demand,” Nayar said.

IMF estimates for Indian GDP
 

Earlier, in July, the International Monetary Fund (IMF) upgraded India’s gross domestic product (GDP) for FY2024-25 by 20 basis points to 7 per cent. The IMF revised its forecast from the previous estimate of 6.8 per cent in April.

Economic Survey estimates
 

The Economic Survey, released a day before the tabling of the Union Budget on July 23, projected real GDP growth for FY25 at 6.5-7 per cent. The survey stated that the outlook for India’s financial sector appears bright but it needs to brace for potential vulnerabilities.