The Q2 GDP growth fell short of the CNBC-TV18 poll estimate of 6.5% and marked a steep decline from the 8.1% growth recorded in the same period last year and 6.7% in the April-June quarter.
Following the release of data on November 29, Chief Economic Advisor V Anantha Nageswaran noted that the second quarter GDP growth was disappointing but maintained that overall growth projection for FY25 at 6.5% was “not in danger.”
While the government remains optimistic, here is what brokerages make of Q2 GDP data and the outlook going forward
| FY25 full year growth downgraded to 6-6.5% from 6.5-7% earlier | ||
| Revised estimate | Earlier estimate | |
| Nomura | 6 | 6.7 |
| Goldman Sachs | 6 | 6.4 |
| Citi | 6.4 | 7 |
| ICICI Securities | 6.5 | 6.8 |
| Morgan Stanley | 6.3 | 6.8 |
| Kotak | 6.1 | 6.7 |
| Emkay | 6 | 6.5 |
HSBC: Noting that industry data came in weaker than services, and consumption was weaker than investment, the brokerage believes that while the Reserve Bank of India (RBI) is expected to cut rates starting February, it could ease liquidity earlier, starting December.
The comments come just days ahead of the three-day RBI Monetary Policy Committee (MPC) meeting which is scheduled to begin on December 4. The MPC decision will be announced on December 6.
UBS: The brokerage has lowered its FY25 real GDP growth expectation to 6.3% year-on-year with a sequential pick-up likely in the second half of the fiscal. It is of the view that there is a need for policy (monetary and fiscal) support to take growth towards 6.5% YoY.
In terms of expenditure, it pointed out that consumption and capex are down with net export contribution going up. On the production side, it said, weak industry segment growth led the slowdown.
Also Read: Bottomline | India’s big growth worry: Incomes
Citi: The brokerage too noted that investment contributed 70 basis points of the 130 basis points growth deceleration. It has revised its FY25 real GDP growth estimate to 6.4% YoY compared to 7% earlier. This compares to RBI’s estimate of 7.2% YoY.
There was a broad-based slowdown in industrial growth, while services remained resilient, it said, however, noting that part of the industrial slowdown could be due to one-offs and an unfavourable base.
According to Citi, consumption growth slowdown was In-line with expectations with rural doing better than urban. There is improvement in rural consumption and continued slowdown in public capex, it added.
The brokerage also believes that while elevated inflation makes a December rate cut unlikely, RBI could explicitly acknowledge the need to support growth, cementing a February rate cut view. That said, the RBI could consider a cash reserve ratio (CRR) cut in December to ease liquidity pressures.
There could also be renewed urgency on public capex, even if it remained below the FY25 target.
Goldman Sachs: The brokerage has lower its calendar year 2024 and FY25 real GDP Growth projection by 30 basis points and 40 basis points to 6.4% YoY and 6.0% YoY, respectively.
However, it, has maintained its calendar year 2025 and FY26 Real GDP growth forecast at 6.3% YoY, each.
Also Read: S&P Global lowers India GDP growth forecast for FY26 and FY27
Nomura: The brokerage has lowered FY25 GDP growth forecast to 6.0% from 6.7% earlier and FY26 to 5.9% versus 6.8% earlier. It expect 100 basis points in rate cuts starting December.
Nomura is of the view that slowing consumption and investment growth suggest domestic growth engines are sputtering. Moderation, on the other hand, reflects a mix of transient factors, which should reverse, and endemic factors as well such as ebbing of post-pandemic pent-up demand. It also points to slowing income growth, RBI’s Macro-prudential tightening and weak private capex.
JPMorgan: This brokerage also believes that RBI will either announce or signal some liquidity easing in anticipation of tightening liquidity. It expects the first cut in February, when there is more conviction of headline CPI rolling over. Base case remains that RBI remains on a dovish hold next week, it added.
Noting that India’s nominal GDP growth slowed to 8%, lowest since December 2020, while the quantum of undershoot is a surprise, the trajectory of slowing growth recently is not.
Morgan Stanley: The brokerage expects growth to have likely bottomed out and thus a rebound is expected in the second half of FY25. It has cut mark-to-market GDP projection to 6.3% YoY for the full year FY25.
It noted that slowdown was evident in both capex and private consumption. However, consumption growth at 6% outpaced capex growth of 5.4% and net exports contributed positively.
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