Icra said the decline in Q2 will be due to factors such as heavy rains and weak corporate margins.
India’s real GDP growth is likely to fall to 6.5 percent for the September quarter due to heavy rains and weak corporate performance, domestic rating agency Icra said on Wednesday.
However, the agency maintained its FY25 growth estimate at 7 percent on expectations of a pick-up in economic activity in the second half of the fiscal year.
The commentary on estimates and outlook comes at a time when there are concerns of a growth slowdown on several factors such as a slowdown in urban demand.
The RBI is sticking to its 7.2 percent growth estimate for the fiscal year, but most observers expect it to stay below the 7 percent mark and many have been cutting it in the past few weeks.
Official data for Q2 economic activity is expected to be released on November 30. In Q1, GDP expansion came in at 6.7 percent.
Icra said the decline in Q2 will be due to factors such as heavy rains and weak corporate margins.
“While government spending and kharif sowing have shown a positive trend, the industrial sector, particularly mining and power, is expected to slow down,” it said.
The services sector is projected to improve, and back-end recovery is expected, leading to full-year GDP growth of 7 percent, it added.
“Q2 FY2025 saw a tailwind in terms of increased investment after the parliamentary elections as well as a healthy expansion in sowing of major kharif crops. “Several sectors faced headwinds due to heavy rains, which affected mining activity, power demand and retail footfall and contracted merchandise exports,” said Aditi Nair, its chief economist.
She said the benefits of a healthy monsoon lie ahead, buoyant kharif production and replenished reservoirs will lead to a sustained improvement in rural sentiment.
There is significant headroom for the Indian government’s capital expenditure, which needs to expand by 52 percent year-on-year in H2 FY2025 to meet the full-year budget estimate, Nair added.
“We are monitoring the impact of the slowdown in personal loan growth on private consumption as well as the impact of geopolitical developments on commodity prices and external demand,” the chief economist said.
In Q2, investment activity improved over Q1, while remaining sluggish amid slow implementation of infra projects due to extra monsoon rains, the agency said, adding that new project announcements in Q2 were at Rs. 6.7 lakh crore is witnessing a healthy recovery.