Due to a fall in private spending, particularly in urban regions where food inflation was high, and unequal growth across sectors, the Indian economy most likely softened to 6.5% in the July-September quarter of the current fiscal year (Q2FY25). The overall GDP result was burdened by heavy rainfall, weak corporate margins, and muted exports.
ICRA, a credit rating firm, estimates that India’s GDP growth slowed slightly. Additionally, ICRA hinted at a slowdown in the rise of gross value added (GVA). The value of goods and services generated inside 6.6% during the September quarter is measured by the economic metric.
According to a Mint poll, the median calculate is close to 26 economists. In the September quarter, India’s economic growth dropped to 6.5 percent. This indicates the six quarters’ slowest pace. It is anticipated that the second quarter of FY25’s GDP figures will be made public on Friday, November 29, 2024.
India’s Q2 GDP are five indicators to watch
1. Rural Consumption
Private consumption in India rebounded 7.4% YoY in Q1 but decelerated in Q2. Rural demand showed resilience due to higher FMCG sales, with two-wheeler and tractor sales increasing 13.2% YoY and 3.2% YoY, respectively. The dichotomy between rural and urban India is explained by higher demand for construction workers, rising land prices, and higher kharif output. Future projections include favorable agricultural output and a 5.9% YoY hike in MSP for Rabi crops.
2. Industrial Activity
Industrial activity in Q2 averaged 2.6% YoY, down from 5.5% YoY in Q1. Manufacturing activity fell to 3.1% YoY, while electricity output dropped 1.1% YoY. Mining activity contracted, while pharmaceuticals, metals, food products, and motor vehicles dragged down manufacturing. Lower government spending impacted cement output, while steel consumption grew double-digit in Q2.
3. Services Sector
India’s services PMI increased to 59.6 in Q2, compared to 60.5 in Q1. Despite weak government spending, the public administration and defense segment saw a 9.5% YoY acceleration, led by private services. Economists expect this segment to see further growth in Q2. Corporate performance in the services sector remains buoyant at 10.1% in Q2.
4. Corporate Payoffs
Indian Inc.’s Q2FY25 results were disappointing, with many companies posting weaker-than-expected results. This led to a selloff in equity markets, raising investor concerns about a potential economic slowdown in the Indian economy.
5. Government capex
ICICI Bank economists predict a 10% YoY increase in central government capex in Q2, while states’ capex contracts at -5.6% YoY. However, the center’s capex must grow by 52% to meet FY25 budget targets.
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