India's GDP growth expected to reach 6.4% in Q3 FY25: ICRA

ICRA estimates that gross value added (GVA) growth will improve to 6.6 per cent in Q3 FY25, up from 5.6 per cent in Q2 FY25, reflecting broad-based expansion. The industrial sector is expected to grow 6.2 per cent (up from 3.6 per cent), the services sector to 7.7 per cent (up from 7.1 per cent), and the agricultural sector to 4.0 per cent (up from 3.5 per cent), ICRA said in a press statement.

The GDP and GVA growth in Q3 FY25 are foreseen to continue to trail the National Statistical Office’s (NSO) initial growth estimates for Q1 FY25 (6.7 per cent and 6.8 per cent, respectively), which had seen some sectors affected by the parliamentary elections, the model code of conduct, and the heat wave in some states.

The growth in net indirect taxes (in nominal terms) eased significantly to low single digits in the quarter from 7.9 per cent in Q2 FY25, owing to a sharp, albeit base effect-led rise in the YoY increase in subsidy disbursement by the centre to 31.1 per cent in Q3 FY25 from 4.3 per cent in Q2 FY25, -53.6 per cent in Q3 FY24, -7.6 per cent in Q2 FY24, estimates ICRA. As a result, the GDP expansion would continue to trail that in the GVA in Q3 FY25 for the third quarter in a row, with a similar trend expected in the full year as well.

“India’s economic performance in Q3 FY25 benefitted from a sharp ramp-up in aggregate government spending (centre + state) on capital and revenue expenditure, high growth in services exports, a turnaround in merchandise exports, healthy output of major kharif crops etc, which would have buffered rural sentiment. Some consumer-focussed sectors saw a pick-up during the festive season, even as urban consumer sentiment dipped slightly, and other sectors such as mining and electricity saw an improvement after weather-related challenges in the previous quarter,” said Aditi Nayar, chief economist, head-research and outreach, ICRA.

ICRA projects the industrial GVA growth to record a broad-based pick-up to 6.2 per cent in Q3 FY25 from 3.6 per cent in Q2 FY25, led by manufacturing to 5.0 per cent from 2.2 per cent, construction to 9.5 per cent from 7.7 per cent, electricity to 5.0 per cent from 3.3 per cent, and mining and quarrying to 2.5 per cent from -0.1 per cent, with the latter two sub-sectors partly benefitting from the easing in rainfall.

India’s investment activity improved in Q3 FY25, as reflected in the uptick in the YoY growth in several investment-related indicators vis-a-vis Q2. This includes capital and infrastructure goods’ output, cement production, engineering goods’ exports, and capital spending of the centre and state governments. The YoY expansion in the Government of India’s (GoI) capex surged to a six-quarter high of 47.7 per cent in Q3 FY25 from 10.3 per cent in Q2 FY25.

Moreover, there was a turnaround in merchandise exports to a YoY rise of 3.3 per cent in Q3 FY25 from a contraction of 4.3 per cent in Q2 FY25.

Fibre2Fashion News Desk (SG)