Following a 6.7% GDP growth in Q1 FY25, SBI predicts that the full-year growth estimate should be adjusted downward to 7%.
New Delhi [India], August 31: A recent report from the State Bank of India (SBI) indicates that while India's GDP growth for the first quarter (Q1) of the financial year 2024-25 (FY25) has moderated, it remains above the average decadal growth of 6.4% for Q1.
According to the Ministry of Statistics and Programme Implementation, the Indian economy grew by 6.7% in real terms during the April-June quarter of FY25. This growth rate marks a slowdown from the previous four quarters, which each saw growth exceeding 7%.
The SBI report noted, "Although Q1 growth has decreased to 6.7% year-on-year, it still surpasses the average decadal growth of 6.4% for this quarter."
The report attributes the slower Q1 growth to weaker performances in the agriculture and services sectors. Agriculture grew by just 2.0%, reflecting issues such as adverse weather conditions or reduced demand. The services sector, while showing better performance with a 7.2% growth rate, also saw a slowdown compared to earlier quarters. This contributed to the overall slower growth for Q1.
Despite the real GDP growth falling short of expectations, nominal GDP, which includes inflation, grew by 9.7% in Q1 FY25, up from 8.5% in Q1 FY24. This suggests that the economy is expanding in value terms, even though real growth is somewhat subdued.
Government expenditure increased by 4.1% during Q1, a slower rate attributed to the general elections held during this period.
The Reserve Bank of India (RBI) had previously projected a GDP growth rate of 7.2% for FY25, based on an expected Q1 growth of 7.1%. With the actual Q1 growth at 6.7%, the SBI report suggests that the full-year growth projection may need to be adjusted downward.
The report concludes that a more realistic GDP growth rate for FY25 would be around 7.0%, slightly below the RBI's earlier estimate, but still reflecting a strong economic performance.