Mixed growth signals, India’s FY25 GDP may slow to 6.7%: Nomura

New Delhi: Brokerage major Nomura Tuesday forecast India’s gross domestic product (GDP) growth to soften to 6.7% in FY25, below the Reserve Bank of India’s forecast of 7.2% and downside risks to its FY26 GDP forecast of 7.2% as growth signals are currently mixed.

Catch-up in government spending and rural demand are positives, but softness in consumer discretionary demand, industrial demand and external demand are negatives, it said in a report.

India’s economy grew 8.2% in FY24, continuing to be fastest-growing major economy in the world. However, its growth slowed to a five-quarter low of 6.7% in the April-June period of FY25 from a year earlier, as agriculture and trade-related services output eased.


To gauge cyclical growth, Nomura said it found that sales of passenger vehicles (PV) and medium and heavy commercial vehicles (MHCV) are important. PVs signal discretionary consumer demand, while MHCV sales have a high beta to overall industrial activity.

“PV and MHCV sales both disappointed in July and August,” it said, adding that the moderation may have been triggered by the fading of post-pandemic pent-up demand, higher interest rates and the slowdown in government spending due to elections.

While wholesale PV sales growth fell 2% on-year in July and 2.5% in August, MHCV sales growth declined to 7.1% and 10.7%, respectively. Inventories for PVs have risen
to 70-75 days in August from 55-60 days in May, with hopes now pinned on the festive season.

Last week, the World Bank raised the growth forecast for the Indian economy for FY25 to 7% from 6.6% projected earlier, led by a recovery in agricultural sector, private consumption and rural demand.

Moody's too has upgraded its economic growth forecast for India to 7.2% in 2024 and 6.6% in 2025, from earlier estimates of 6.8% and 6.4%, respectively, driven by broad-based growth.