India’s GDP growth for Q1FY25 would be in the range of 7.0-7.1 percent with a downward bias, according to the latest SBI ecowrap report. However, manufacturing gross value added (GVA) will be below 7.0 percent and may be come in the range of 6.7-6.8 percent, it added.
The global economic growth outlook remains uncertain, but the softening inflation has made space for monetary policy easing, the report added.
Staff costs inched up in the manufacturing sector, but debt servicing capability measured in terms of the interest coverage ratio remained stable. Against this backdrop, profit margins have declined, and this will pull down manufacturing growth, the report said.
The Indian economy remained resilient despite headwinds from supply chain pressures due to the rise in global freight and container costs, and semiconductor shortages, it added.
Earlier this month, the RBI Monetary Policy Committee (MPC) projected real GDP growth rate for 2024-25 to be 7.2 percent. The central bank had projected real GDP for 2024-25 to be 7.2 percent in the first MPC announcements after the Lok Sabha elections 2024 in June.
RBI projected real GDP for 2024-25 Q1 at 7.1 percent, Q2 at 7.2 percent, Q3 at 7.3 percent, and Q4 at 7.2 percent. It is slightly altered from the previous projections of 7.3 percent, 7.2 percent, 7.3 percent, and 7.2 percent for the four consecutive quarters for this year.
Drop in manufacturing GVA
The dip in manufacturing gross value added is attributed to the indicators of corporate performance in Q1 of financial year 2024-25, which points to moderation in sales growth of manufacturing companies in both nominal and real terms.
As per the report, around 4000 listed entities reported both topline and bottomline growth of around 9 percent in Q1FY25 compared to Q1FY24. However, ex-BFSI, corporates reported only 5 percent growth in topline with degrowth in EBIDTA of -1 percent in Q1FY25 compared to growth of 23 percent in Q1FY24. Subsequently, corporate GVA grew by around 10.9 percent in Q1FY25 compared to 17 percent in Q4FY24 and 26 percent in Q3FY24. During Q1FY25, aggregate EBIDTA margin also fell by around 100 bps in Q1FY25 for the corporates, the ecowrap report added.
Revival of agri sector on good monsoon
The report expects agricultural growth to rebound to 4.5-5 percent in FY25 adding around 30 bps over RBI forecast as southwest monsoon activity has revived across the country.
After a lackluster performance in June, southwest monsoon picked up from early July, closing the deficit. As on August 25, 2024, the cumulative rainfall was 5 percent above the LPA as against 7 percent below the LPA during the same period last year.
This has boosted the kharif crop sowing with the total sown area at 103.1 million hectares (94 percent of full season normal area) as of August 20, 2024, which is 2 percent higher than the corresponding period last year.