Union Bank Report Predicts Moderate GDP Growth for Q1 FY25

Union Bank forecasts a GDP growth of 6.7% for Q1 FY25, slightly below RBI's 7.1% projection. A slowdown in the industrial sector and June's seasonal weakness are major contributors. Despite this, the overall annual GDP growth is expected to remain strong at 7%.

Ahead of the official release of the first quarter GDP growth numbers for FY25 on August 30, a report by Union Bank suggests the GDP rate will moderate to around 6.7%. The Gross Value Added (GVA) growth for the same period is likely to settle at around 5.8%, compared to 6.3% in the last quarter of the previous fiscal (Q4 FY24).

This figure falls slightly below the Reserve Bank of India's (RBI) projection of 7.1% for Q1 FY25. The report identifies the industrial segment as the primary driver of this slowdown, exacerbated by election-related uncertainties, code of conduct impositions leading to lagged government spending, and June traditionally being a weak quarter.

The downturn marks the third consecutive quarter of declining industrial growth, with the sector's GVA growth dropping from 8.4% in Q4FY24 to 5.8% in Q1FY25. The manufacturing segment has been notably affected, with GVA growth plummeting from 8.9% to 4.5% year-on-year. Meanwhile, the services sector saw a marginal reduction, and the agriculture sector experienced a significant upswing. Despite the Q1 slowdown, the overall GDP growth for the full year is expected to remain robust at 7%.

(With inputs from agencies.)