According to a recent State Bank of India (SBI) report, India’s GDP growth for the first quarter (Q1) of the financial year 2024-25 (FY25) has moderated but remains higher than the average decadal growth for Q1, which stands at 6.4 per cent. Official data from the Ministry of Statistics and Programme Implementation shows that the Indian economy expanded by 6.7 per cent in real terms during the April-June quarter of FY25.
This figure marks a slowdown compared to the preceding four quarters, during which the economy consistently grew by over 7 per cent. The report notes, “Though the growth for Q1 has reduced to 6.7 per cent year-on-year, it is still higher than the average decadal growth of 6.4 per cent for Q1.”
The subdued performance in Q1 is attributed primarily to weaker outcomes in both the agriculture and services sectors. Agriculture, a key component of the Indian economy, grew by just 2.0 per cent, which could be due to adverse weather conditions or lower demand. Meanwhile, the services sector registered a growth of 7.2 per cent, which is still positive but lower than previous quarters.
Despite the weaker-than-expected real GDP growth, the report highlights that nominal GDP, which accounts for inflation, rose by 9.7 per cent in Q1 FY25. This represents an improvement compared to the 8.5 per cent growth seen in Q1 FY24, indicating that the economy is expanding in value terms.
The report also pointed out that government expenditure during Q1 grew by 4.1 per cent, which is slower than in previous periods. This slower growth may be attributed to the general elections that took place during the quarter.
Previously, the Reserve Bank of India (RBI) projected GDP growth for FY25 at 7.2 per cent, with an anticipated Q1 growth of 7.1 per cent. However, given the actual growth of 6.7 per cent, the SBI report suggests that the annual growth estimate may need to be revised. It now predicts that a GDP growth rate of around 7.0 per cent for FY25 appears more reasonable, slightly below the RBI’s initial estimate.
The report concludes, “Now with 6.7 per cent growth in Q1, the new annual projection would be 7.1 per cent. We believe that GDP growth for FY25 will be slightly lower than the RBI’s estimate, and 7.0 per cent growth looks more reasonable.”
