Economy likely to grow at 6.2-6.3% in Q3: SBI

New Delhi: India’s gross domestic product (GDP) is expected to grow by 6.2 to 6.3 per cent in the quarter ended December 2024, remaining sluggish for the third quarter in a row after a robust expansion recorded in the previous year, according to a report by State Bank of India (SBI) released on Wednesday.

“Assuming there are no major revisions in Q1 and Q2 estimates, we are expecting FY25 GDP at 6.3 per cent,” SBI said.

As per the first advance estimate of GDP released by the National Statistics Office (NSO), the Indian economy is projected to grow by 6.4 per cent in the financial year 2024-25.

In the first quarter of 2024-25, GDP growth stood at 6.5 per cent. It slumped to 5.4 per cent in the July-September period, the slowest in seven quarters.

As per SBI’s ‘Nowcasting Model’, the forecasted GDP growth for Q3 would be 6.2-6.3 per cent. The NSO is scheduled to release the official data on February 28. 

SBI noted in its report that the GDP growth in Q3 is likely to improve sequentially on the back of improvement in government capital expenditure. “Capex is showing improvement in Q3 FY25 with majority of the states’ capex as percentage of budget estimate being lower in FY25 on date but embracing a momentum in Q3 FY25 which augurs well for future developments,” it said.

Growth in factory output as measured by the Index of Industrial Production (IIP) accelerated to 4.3 per cent Q3 from 3.3 per cent in the previous quarter.

The percentage of indicators showing acceleration has increased to 74 per cent in Q3 versus 71 per cent in Q2. Continuing the momentum, a healthy rural economy is further reinforcing stability and sustains momentum in other sectors even as rural agriculture wage growth is consistent and domestic tractor sales and rabi crop sown have picked up momentum, SBI noted in the report.

Slowdown in current household inflation expectations encourages higher discretionary spending and drives demand-led growth. Moderation in declining consumer confidence suggests that households are now optimistic about global developments, disinflation process, and economic prospects – enabling long-term sustainable growth, it said.

According to SBI, better corporate profits also indicate improvement in economic activities during the third quarter of the current fiscal over the second quarter. Indian Inc reported positive EBIDTA (earnings before interest, taxes, depreciation and amortisation) growth/margins (44 basis points) after two quarters, while corporate gross value added (GVA) has improved substantially quarter-on-quarter, it said.