India’s GDP growth data for the second quarter of the current financial year will be out on November 29. Ahead of the release of the data by the government, ratings agencies, brokerages and banks have pegged about one percentage point dip in GDP growth rate year on year. Most estimates suggest the growth rate to be in the range of 6.5% to 6.8%, compared with 7.6% growth in Q2 FY24. The estimates also point out that the Indian economy may pick up in the second half of the current financial year.

Ratings agency ICRA said the country’s GDP and GVA growth is anticipated to dip to 6.5% and 6.6%, respectively, in Q2 FY2025 from 6.7% and 6.8%, respectively, in Q1 FY2025, with bountiful rains and weak margins offsetting the buoyancy injected by the turnaround in the government’s capital expenditure and healthy trends in Kharif sowing. “Several sectors faced headwinds on account of excess rainfall that affected mining activity, electricity demand and retail footfalls, and the contraction in merchandise exports in Q2 FY2025.” ICRA said in the Economic Outlook and Macro Trends report released this month.  

“We estimate Q2FY25 GDP growth around 6.5%, data for which will be released on 29 November and expected Q3 and Q4 growth numbers could push overall yearly GDP growth closer to 7% in FY25,” said SBI on growth outlook in its Ecowrap report. Bank of Baroda, meanwhile, anticipates India's GDP growth in Q2 to be at 6.9 %, higher than 6.7% in the first quarter. “The hitherto buoyant global economy appears somewhat susceptible to certain degrees of downward pressure with recent spikes in geopolitical tensions taking a toll. Domestically, there is some incipient pressure evident on the domestic economy too. A dip looks plausible across select cohorts of agriculture, industry and services in Q2,” SBI Research said.

Nirmal Bang Institutional Equities has pegged the second quarter GDP growth at 6.4 per cent, down from the earlier estimates of 6.8 per cent. The downgrade is majorly on the back of modest growth in net taxes on products estimated at nearly 5-6 per cent in Q2FY25 versus 4.1 per cent in Q1FY25.

Recovery on Anvil

The agencies have also expressed hope that the economy is likely to gain momentum in the second quarter of the fiscal. “The outlook for H2, FY2025 is buoyant, with a likely improvement in rural demand owing to the robust kharif output and upbeat outlook for rabi crops amid replenished reservoir levels, as well as expectations of a back-ended pick up in the government of India’s capital spending amid the significant headroom to meet the budgeted target for FY2025,” said the ICRA report.  

“While economic activity displayed a strong growth in October 2024, boosted by the festive demand, ICRA remains watchful of the impact of a slowdown in personal loan growth on private consumption as well as geopolitical developments on commodity prices and external demand,” the report said.  

ICRA expects the back-ended pick-up in economic activity to boost the GDP and GVA growth in H2 FY2025, resulting in a full-year expansion of 7.0% and 6.8%, respectively. “The blip in Growth in Q2 might be an Impasse, tailwinds of recovery is now reinvigorated by a surge in rural demand, a proxy of better income levels,” said SBI while also calling for better capturing of soft data need of the hour as the shift towards Q-commerce has accentuated in urban areas.

“High-frequency indicators indicate that aggregate demand continued to grow (albeit with a slower momentum than in the preceding quarters and painting a somewhat mixed picture). For instance, domestic passenger vehicle sales, which are an indicator of urban demand as well as other indicators of consumption and demand such as diesel consumption, electricity demand and bitumen consumption have eased. Transport and Communication indicators viz. passenger and freight traffic at airports and toll collection are showing traction,” it added.