Nomura lowers its FY25 economic growth forecast for India to 6.7 percent

Nomura lowered its FY25 economic growth forecast for India to 6.7 percent year-on-year (yoY) from 6.9 percent after government data showed the country’s gross domestic product (GDP) grew slower than expected on an annual basis in the April-June quarter. 

“Overall, Q2 GDP data are weaker than expected, although the role of transitory factors like elections, versus more persistent factors like slowing profit growth is still unclear,” said Nomura analysts, in a note dated August 30.  

India's economy grew at 6.7 percent in the April-June quarter of FY25 over the growth rate of 8.2 percent in Q1 of FY 2023-24. This figure reflects a deceleration from the 7.8 percent growth seen in the previous quarter of FY24 and 8.2 percent in the corresponding period last year. 

“Real GDP has been estimated to grow by 6.7 percent in Q1 of FY 2024-25 over the growth rate of 8.2 percent in Q1 of FY 2023-24,” the finance ministry said in a statement. 

The latest National Statistical Office (NSO) data stated India’s gross value added or GVA, which is GDP minus net product taxes and reflects growth in supply, also grew 6.8 percent during April-June 2024. 

The Reserve Bank of India’s (RBI) forecast was 7.1 percent growth in the first quarter. Analysts predicted growth in the range of 6-7.1percent for Q1 FY25, compared with 7.8 percent in the previous quarter (Q4 FY24).  

ICRA anticipated a 6 percent growth, while State Bank of India (SBI) and Anand Rathi Research expected a growth rate of 7.1 percent and 7 percent, respectively. Acuite Ratings & Research forecasts a 6.4 percent growth, and the RBI also projects a 7.1 percent increase in GDP for the April-June 2024 quarter. 

However, Nomura added, “Even as government spending revives, lower corporate profit growth and a moderation in credit growth are likely to persist as growth drags.” 

Separately, Goldman Sachs and JP Morgan maintained their FY25 GDP forecast for Asia’s third-largest economy at 6.5 percent. 

The central bank, in its August monetary policy statement, revised India’s growth forecast for the April-June quarter downwards by 20 basis points to 7.1 percent. This adjustment was made due to factors such as subdued government capital expenditure, decreased corporate profitability, and lower core output. Despite this revision, the central bank has maintained the full-year FY25 GDP growth estimates at 7.2 percent.