India is projected to record economic growth of 6.2% in the second quarter (July-September) of 2024-25, due to a high year-earlier base and excessive rainfall, according to estimates released by Barclays on Friday.
The slowdown in the second quarter was due to consumption and production indicators, the report noted. Urban demand is showing signs of weakness, with declines primarily in service areas such as retail sales, air passenger traffic, toll collection and bank credit.
Government consumption, which was subdued in the first quarter due to the general election, has picked up. “Although outlays as a percentage of budgeted spending remain slightly short of the average of the past five years,” the report said.
Government capex spending also remains low and has yet to recover from the election-related pullback. Private investment, on the other hand, has not yet gained momentum.
On a positive note, rural consumption is reviving supported by a pickup in rural wage growth and reduced demand for MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Scheme) jobs. The report also suggested that growth in gross value added (GVA) will be slightly lower than 6% year-on-year. “Growth in both industry and services GVA is likely to decelerate, while agriculture GVA will likely rebound sharply owing to increased activity in Q2.” In light of the slowdown in the first half, Barclays has revised its GDP forecast for 2024-25 to 6.8% from 7% earlier. While a recovery is expected in the second half, it is likely to remain lower than the pace in 2023-24.
Indian industry bodies have submitted their wishlist for the upcoming budget, calling for an amnesty scheme for customs, tax cuts for individuals and LLPs, and streamlined tax compliance processes. They also urged the government to expedite faceless appeals, establish a dedicated dispute resolution system, and boost infrastructure spending.
Growth will bounce back to 7% driven by lower policy rate and an increase in government spending. However, the report notes that if President-elect Donald Trump were to significantly raise import tariffs, it may weigh on growth in FY26, though India’s economy being more domestic oriented would be insulated from such risks compared to other emerging markets in Asia.Inflation is projected to rise to 5.7% in October, up from 5.5% in September, with food inflation remaining high at 8.8% (8.4% in September) owing to a spike in vegetable prices.
