Domestic rating agency Icra estimated India's growth rate maybe 6.5% in the September quarter

Domestic rating agency Icra estimated that India's real GDP growth rate may decline to 6.5 percent in September on Wednesday. The reason behind this is because of heavy rains and weak performance of companies in quarterly results. However, the agency has retained the growth forecast for FY 2025 at 7 percent due to the expectation of a pick-up in economic activity in the second half of the financial year. Icra's comment comes at a time when concerns are being expressed about a slowdown in growth due to many factors such as a decrease in urban demand.

RBI has maintained its forecast of 7.2 percent growth for the current financial year. A majority of the analysts said the growth rate will be below 7 percent. For the last couple of weeks, several analysts have been talking about cutting the forecast over the growth rate. The official data on economic activity for the second quarter is scheduled to be published on November 30. In the first quarter, the GDP growth rate was 6.7 percent.

ICRA said that the decline in the growth rate in the second quarter will be due to factors such as heavy rains and weak corporate margins. The report said, "There has been a positive trend in government spending and kharif sowing, but the industrial sector, especially the mining and power sector, is expected to slow down."

The report said that the service sector is expected to improve compared to last year, due to which the GDP growth rate for the full year is estimated to be 7 percent. Chief Economist Aditi Nayar said, "Q2 FY25 saw a healthy growth in sowing of key kharif crops along with an increase in capital expenditure following the parliamentary elections. Several sectors faced headwinds due to heavy rainfall, which impacted mining activity, power demand, and retail customer base and also dampened merchandise exports."

She further said the benefits of a good monsoon will carry forward, and besides, the rural sentiment is likely to improve steadily together with the rise in kharif production and reservoir replenishment. Nayar said there is enough headroom for the Government of India's capital expenditure, which needs to rise 52 percent year-on-year in the second half of FY25 to meet the full-year budget estimate.

"We are also 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," Nayar said.

According to the agency, the slowdown was due to slow implementation of infrastructure projects due to excess rains in the monsoon. However, investment activity in the second quarter was better than the first quarter. The agency said that announcements related to new projects saw a good increase of Rs 6.7 lakh crore in the second quarter.