NEW DELHI: India’s economy likely grew at 6.3% in October-December, up from 5.4% in July-September, mainly due to a broad-based pick-up in economic activity, the median of 16 estimates by economists showed.
If the Q3FY25 growth comes in at 6.3%, GDP will have to grow by 7-7.3% in Q4 to average 6.4% for the full financial year. In Q1 and Q2, GDP grew by 6.7% and 5.4%, respectively.
Economists say the lacklustre growth in Q2 was mainly due to manufacturing activity growing at a snail’s pace (2.2%), which has recovered substantially in the December quarter.
“Manufacturing should see a big pick-up in Q3, which would be leading the growth during the quarter,” said Upasna Bhardwaj, chief economist, Kotak Mahindra Bank. In Q2FY25, manufacturing had grown merely 2.2%, at a six-quarter low.
“We’ve seen relatively better corporate earnings data in Q3 as against Q2, and most high-frequency indicators have shown an improvement,” Bhardwaj added.
The Reserve Bank of India (RBI) bulletin for February noted that high frequency indicators show the economy is on a “path of recovery” during H2FY25 from the “loss of momentum” witnessed in the first half.
“Pick-up in tractor sales growth, and fuel consumption, and sustained growth in air passenger traffic also point to a recovery in overall momentum. Rural demand continues to hold up, buoyed by increasing farm incomes,” said the bulletin.
In rural areas, sales of fast-moving consumer goods (FMCG) companies grew by 9.9% in Q3FY25, much higher than 5.7% in Q2, noted the bulletin. Urban demand also exhibited a recovery with 5% growth in Q3, being nearly double of 2.6% in the previous quarter, it said.
Moreover, according to SBI Research, about 3,500 companies witnessed GVA growth 9.55% in Q3FY25 as against 6.65% in Q2. These companies saw Ebidta growing by 5.2% in Q3 as against (-)1.5% in Q2, and profit after tax (PAT) by 9% as compared to 6%.
SBI Research expects the economy to grow 6.2-6.3% in Q3FY25, based on its “nowcasting model”, which tracks data of 36 high frequency indicators.
SBI said that capex is showing improvement in October-December with the majority of the states’ capex as percentage of Budget Estimate (BE) being lower in FY25 on date, “but embracing a momentum in Q3FY25 which augurs well for future developments”.
Bank of Baroda (BoB) expects agriculture growth to improve to 4.5% in Q3FY25 against 3.5% growth in Q2. “The improvement is on account of higher growth than was initially anticipated after the first advance estimates for kharif crops noted the total food grain production will be higher this year when compared with last year,” said Jahnavi Prabhakar, economist, BoB.
For Q4, economists say that rural demand is likely to be stronger as has been reflected by recovery in tractor and two-wheelers sales, and uptick in e-way bill generations in January will provide some support to services.
Source: The Financial Express
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