SBI Economists Predict Dip in India's GDP Growth for Q1 FY25

Economists at SBI forecast a decline in India's real GDP growth for the June quarter of FY25 to 7.1%, driven by softer manufacturing and lower government spending. The report suggests a dip in GVA to 6.7-6.8% and raises concerns over global economic uncertainty, while retaining a 7.5% growth estimate for FY25.

Economists at the country's largest lender, State Bank of India (SBI), on Monday joined other analysts in forecasting a slowdown in economic growth, estimating India's real GDP growth for the June quarter at 7.1%.

The economists noted that gross value added (GVA) is expected to fall below 7%, landing between 6.7% and 6.8% for the April-June period of this fiscal year when compared to the previous year.

"According to our 'Nowcasting Model,' the forecasted GDP growth for Q1 FY25 would be 7.0-7.1%, and GVA is at 6.7-6.8% with a downward bias," the economists said.

It is noteworthy that real GDP growth stood at 7.8% in the June quarter last year and the preceding March quarter. Analysts attribute the moderation in economic activity to softer manufacturing and reduced government spending due to general elections.

The report also highlighted that the uncertain global growth outlook and softening inflation provide space for potential monetary policy easing.

SBI economists attributed their growth estimates to 41 lead indicators and noted a slowdown in sales growth and rising staffing costs for manufacturing companies. Profit margins have declined as a result, impacting manufacturing growth, they added.

Excluding banking, finance, and insurance companies, corporates reported only a 5% revenue growth and a 1% decline in operating profits in Q1 FY25.

Despite these concerns, SBI economists retained their 7.5% growth estimate for the fiscal year 2024-25, higher than the RBI's 7.2% forecast.

The report also touched on the global economic outlook, citing persistent geopolitical tensions and fears of a potential recession due to weaker-than-expected labor market outcomes in key economies and financial market volatility.

On a positive note for India, the South West monsoon has improved, with cumulative rainfall 5% above the long-period average as of August 25, compared to a 7% deficit during the same period last year.

(With inputs from agencies.)