A worker cuts a metal plate inside an industrial tank manufacturing factory
Credit: Reuters Photo
New Delhi: India’s economic growth is likely to rebound to around 6.2 to 6.4% in the October-December 2024 period (Q3FY25) from a seven quarter-low growth in the previous three months, driven by increased government spending and festive demands, analysts said.
According to a State Bank of India (SBI) Research report, the country’s gross domestic product (GDP) is expected to expand by 6.3% in Q3 provided there are no major revisions in the previous two quarters’ numbers. ICRA has pegged its Q3 growth forecast at 6.4%.
The economy recorded a sharp deceleration in growth in the first two quarters of the current financial year. It came in at 6.7% in April-June (Q1) and dipped further to 5.4% in July-September period (Q2), the slowest pace of expansion in seven quarters. Slowdown in the government capital expenditure and poor performance of the manufacturing sector were among the key reasons for the sluggish growth.
The National Statistics Office (NSO) is scheduled to release the Q3 numbers on Friday.
According to analysts the economic growth is likely to improve in the second half of the year backed by rebound in government expenditure.
“Economic performance in Q3 benefitted from a sharp ramp-up in aggregate government spending (centre plus states), high growth in services exports, a turnaround in merchandise exports, healthy output of major kharif crops etc, which would have buffered rural sentiment,” said Aditi Nayar, Chief Economist at ICRA Ltd.
Some consumer-focused sectors saw a pick-up during the festive season, even as urban consumer sentiment dipped slightly, and other sectors such as mining and electricity saw an improvement after weather-related challenges in the previous quarter, she said.
SBI Research also noted in its report that the GDP growth in Q3 is likely to improve significantly over the previous quarter on the back of improvement in the government capex.
Government capital expenditure surged to Rs 2.7 lakh crore in October-December 2024, which is around 30% higher when compared with the average of the previous quarters.
“While long-term GDP sustainability depends on income growth, job creation, and private sector investment, the Q3 growth outlook remains positive, largely supported by public expenditure, conducive monsoon conditions leading to higher output in major Kharif crops, strong performance of the services sector, and services exports,” said Mahendra Patil, Founder and Managing Partner, MP Financial Advisory Services.