India has posted a GDP growth rate of 6.7 per cent for the first quarter ended June 2024 (Q1 FY25). Though the latest economic growth is the lowest in five quarters, it is still the fastest among the world’s major economies.

During the April-June 2024 quarter, the US economy grew 3 per cent year-on-year, the UK recorded just 0.4 per cent growth, Germany posted a 0.3 per cent rise (fell 0.1 per cent on a quarterly basis), while China expanded at a lower-than-expected rate of 4.6 per cent y-o-y, according to the latest data.

Japan grew 1.8 per cent in the January-March 2024 quarter, the latest available data.

“India still remains the fastest growing economy among the major economies of the world. Critical sectors, including manufacturing, continue to retain strength and should be further picking up, going forward,” said Deepak Sood, secretary general of ASSOCHAM, following India’s Q1 FY25 GDP growth data.

He added that extreme weather-related issues impacted the agricultural sector dragging the overall GDP growth to 6.7 per cent in the first quarter of 2024-25. However, the monsoon has spread well, improving prospects in the subsequent quarters.

India’s Q1 GDP Growth: What Experts Say

“Expectedly, GDP growth in Q1FY25 at 6.7 per cent is largely in line with market expectations albeit it is slightly higher than our forecasts. The gap between GVA and GDP growth has narrowed significantly due to higher subsidy payouts in the first quarter of the year,” said Suman Chowdhury, executive director and chief economist, Acuité Ratings & Research.

At 6.8 per cent y-o-y, India’s gross value added (GVA) growth is 50 bps higher than what had been reported in Q4FY24 and is clearly a confirmation of the continuing momentum in the general economic activity. In particular, growth in the construction sector at 10.5% YoY has surprised on the upside given the expectation that the sector typically slows down during the election period, he said.

Ravi Singh, senior vice-president (retail research) at Religare Broking Ltd, said, “The slowdown in Q1 GDP is primarily attributed to a high base effect, adverse weather conditions, and restrictions on government activities due to the election code of conduct. Nevertheless, the underlying data is encouraging, with notable increases in private consumption and a modest rise in investment activity.”

Coupled with declining inflation, this solid growth is expected to support continued strong performance in the Indian equity market, he said.

According to the latest official data, India’s CPI inflation in July 2024 stood at 3.54 per cent, which is the lowest since August 2019. It is within the RBI’s target of 4 per cent (+/- 2 per cent).

What Are FY25 GDP Growth Expectations?

Economists retain India’s GDP growth estimates for FY25 at 6.8 per cent-7 per cent, supported by increased government capital expenditure (capex) and a pent-up rural demand during the festive months.

“We continue to forecast an annual GDP growth of 6.8% for FY25. Government capital expenditure will continue to be a major pillar of such growth as in the previous year; at the same time, higher growth in private consumption from the rural sector is likely to augment the growth figure,” Acuité Ratings & Research’s Chowdhury said.

Upasna Bhardwaj, chief economist at Kotak Mahindra Bank, also retains the GDP growth expectations of 6.9 per cent in FY2025, aided largely by rural demand and government spending while watching closely the likely fatigue in urban demand, private capex and the pace of global slowdown.

Aditi Nayar, chief economist at ICRA, anticipates a back-end pickup in the GDP growth to above 7 per cent in H2 FY2025, boosted by factors such as government capex and pent-up rural demand during the festive months.