Nomura forecasts further downward revision of India's FY25 GDP growth to 6%

The advance estimates place nominal GDP growth at 9.7 percent year-on-year for FY25

The Indian economy is projected to grow by 6.4 percent in 2024-25, down from 8.2 percent in FY24, according to the National Statistical Office's first advance estimates. This forecast marks the lowest growth rate since the pandemic and falls short of the Reserve Bank of India's recent projection for FY25. Analysts at Nomura foresee a further downward revision of FY25 GDP growth to 6 percent year-on-year, citing a slowdown during the October-November period.

Since these advance estimates are based on partial data and the economy is currently in a slowdown phase, Nomura analysts expect the FY25 GDP growth to be revised down due to mixed performance during the October-November festive season, especially in consumption, along with weak industrial and investment growth.

Additionally, early data for December does not suggest a strong recovery yet. Nomura analysts believe India is undergoing a cyclical growth slowdown, driven by factors such as waning urban pent-up demand, tight monetary policy, household balance sheet stress, slowing nominal income growth, and a negative credit impulse.

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The statistical agency expects GDP growth to recover to 6.7 percent in the second half of FY25, up from 6 percent in the first half. This rebound is projected to be fueled by higher private consumption (7.8 percent vs 6.7 percent), government spending (6.1 percent vs 2 percent), and a sharp decline in import growth.

On the supply side, growth in H2 FY25 is expected to be driven by a notable rise in agricultural GVA growth (4.5 percent vs 2.7 percent) and industrial growth (5.7 percent vs 4.7 percent), with manufacturing being a key contributor. Services GVA growth is expected to remain steady at 7 percent year-on-year in H2 FY25, though there will be slower growth in construction (8.1 percent in H2 vs 9.1 percent in H1), public administration (8.9 percent vs 9.3 percent), and continued weakness in the "trade, hotels, transport & communication" sector at 5.8 percent.

The advance estimates place nominal GDP growth at 9.7 percent year-on-year for FY25, which is below the government's projection of 10.5 percent.

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