India's GDP Growth to Moderate to 6 Quarter Low Of 6 Percent in Q1: ICRA

ICRA on Thursday projected India's economic growth to moderate to a six-quarter low of 6 per cent 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 per cent, lower than the 8.2 per cent clocked in 2023-24.

"ICRA has projected the year-on-year (YoY) expansion of the GDP to moderate to 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 official data for June quarter growth will be released by MoSPI (Ministry of Statistics and Programme Implementation) on August 30.

The growth in the June quarter (Q1) of 2023-24 was 8.2 per cent.

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 per cent and 6 per cent, 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 per cent and 6.5 per cent respectively.

In particular, there is considerable headroom for the GoI's capital expenditure, which needs to expand by 39 per cent 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 per cent in the second half of FY2025, Nayar added.