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Union Bank Predicts India’s Q1 FY25 GDP Growth To Slow To 6.7% Due To Industrial Decline

Ahead of the official release of the first-quarter GDP growth numbers for FY25 on August 30, a report by the Union Bank suggests the GDP rate to be moderated at around 6.7 percent.

Union Bank Predicts India’s Q1 FY25 GDP Growth To Slow To 6.7% Due To Industrial Decline

Ahead of the official release of the first-quarter GDP growth numbers for FY25 on August 30, a report by the Union Bank suggests the GDP rate to be moderated at around 6.7 percent. The Gross Value Added (GVA) growth for the same period is likely to settle at around 5.8 percent as against 6.3 percent in the last quarter of the previous fiscal (Q4 FY24). This figure is slightly below the Reserve Bank of India’s (RBI) projection of 7.1 percent for Q1 FY25.

As per the report, the key driver of the slowdown was the industry segment growth. Election-related uncertainty, the imposition of a code of conduct leading to lagged government spending, and June being a seasonally weak quarter have added to the anticipated moderate GDP growth figure.

“Key driver of the slowdown was the industry segment, and secondly, June is a seasonally weak quarter and election-related uncertainty combined with lagged government spending exacerbated the impact. High-frequency indicators also signaled a slowdown as reflected in our economic activity index,” the report added.

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High-frequency indicators also signaled a slowdown as reflected in our economic activity index, the report added in support of its anticipation. This marks the third consecutive quarter of declining industrial growth, with the sector’s GVA growth rate falling from 8.4 percent in Q4 FY24 to 5.8 percent in Q1 FY25.

Highlighting the downturn, it added that the manufacturing segment has been hit hard, with GVA growth dropping sharply from 8.9 percent in the previous quarter to 4.5 percent year-on-year. This decline is attributed to a significant slowdown in earnings, with operating profits of listed manufacturing companies rising by a mere 2 percent (YoY). The construction sector also witnessed a continued decline, with growth slipping from 8.7 percent in Q4 FY24 to 7.5 percent this quarter.

Meanwhile, the services sector, which has been a strong performer in the Indian economy, witnessed a slight reduction in growth to 6.6 percent from 6.7 percent in the last quarter. However, the agriculture sector is likely to give a surprise on the upside with its growth spiking sequentially to 2.2 percent in Q1 FY25 from 0.6 percent in Q4 FY24. This will be the highest number in the last four quarters, though it is still lagging behind the growth rate of 3.7 percent seen in Q1 FY24.

The report, however, is optimistic about the overall growth outlook and says that even with a slowdown in Q1, the GDP growth for the full year will remain strong at 7 percent.

“On a full-year basis, we continue to expect GDP growth to remain strong at 7 percent with a slowdown primarily statistical on closing wedge between GDP and GVA growth. Risks to growth are from a sharper-than-expected global growth slowdown and uneven monsoon distribution limiting rural demand recovery,” it added.

(Except for the headline, this story has not been edited by Newsx staff and is published from a syndicated feed.)

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