ICRA forecasts India's Q1 GDP growth to fall to 6%, a six-quarter low

India's economic growth will moderate to 6% in the April-June quarter, a six-quarter low, primarily owing to a reduction in government capital expenditure and a decline in urban consumer demand, domestic rating agency ICRA said in a forecast issued on August 22.

For the full fiscal year 2024-25, ICRA expects the GDP to grow by 6.8%, down from the 8.2% achieved in 2023-24.

The rating agency stated, "ICRA has projected the year-on-year (YoY) expansion of the GDP to moderate to a six-quarter low of 6 per cent in Q1 FY2025 from 7.8 per cent in Q4 FY2024, amidst a contraction in government capital expenditure and a dip in urban consumer confidence."


Official data for June quarter growth will be released by the Ministry of Statistics and Programme Implementation (MoSPI) on August 30. In the first quarter (Q1) of 2023-24, the growth rate was 8.2%.

ICRA Chief Economist Aditi Nayar noted several contributing factors for the projected moderation in the June quarter of the current fiscal year. According to her, the quarter experienced a temporary lull in various sectors due to the Parliamentary elections and sluggish government capital expenditure at both central and state levels. Further, she mentioned an unexpected decline in urban consumer confidence as per the Reserve Bank of India's Consumer Confidence Survey. Additionally, the lingering impact of unfavorable monsoon conditions from last year and an uneven start to the 2024 monsoon hindered broader improvement in rural sentiment.

"Lower volume growth combined with diminishing gains from commodity prices weighed upon the profitability of some of the industrial sectors. The heat wave also affected footfalls in various service sectors, even as it provided a significant boost to electricity demand. On balance, we foresee a transient moderation in India's GVA (Gross value added) and GDP (Gross domestic product) growth in Q1 FY25 to 5.7 per cent and 6 per cent, respectively," Nayar explained.

For the entire fiscal year FY2025, ICRA anticipates a back-ended pick-up in economic activity, which would boost GDP and GVA growth to 6.8% and 6.5%, respectively. Nayar pointed out there is substantial room for the Government of India's capital expenditure to expand by 39% year-on-year in the July-March FY2025 period to meet the full year's budget estimate. This is expected to drive GDP growth above 7% in the second half of FY2025.

The insights by ICRA indicate a temporary slowdown in India's economic growth, with several sectors witnessing a downturn influenced by government actions, urban consumer sentiment, and weather conditions, but project a recovery in the latter half of the fiscal year.