GDP growth to decline to 7.1% for June quarter, say SBI economists

SBI economists have, however, retained their 7.5 percent growth estimate for the fiscal year 2024-25, which is higher than the 7.2 percent made by the RBI.

Economists at the country's largest lender SBI on August 26 joined other watchers forecasting a slip in the economic growth and estimated India's real GDP growth to come at 7.1 percent for the June quarter.

The economists said the growth in gross value added (GVA) will fall below 7 percent to 6.7-6.8 percent for the April-June period this fiscal when compared to the year-ago period.

"As per our 'Nowcasting Model', the forecasted GDP growth for Q1 FY25 would be 7.0-7.1 percent, and GVA is at 6.7-6.8 percent with a downward bias," the economists said.

It can be noted that the real GDP growth had come at 7.8 percent in the June quarter last year and the preceding March quarter. A slew of analysts have been pointing to a moderation in economic activity in the June quarter, mainly driven by softer manufacturing and lower government spending due to the general elections.

The report also said that given the uncertain global growth outlook and the softening inflation, there is a space for monetary policy easing.

The SBI economists said its growth estimates are based on 41 lead indicators, and pointed to a moderation in sales growth and an inching up in staffing costs for manufacturing companies.

"Against this backdrop, profit margins have declined, and this will pull down manufacturing growth," it added.

If one were to exclude the banking, finance and insurance companies, corporates reported only 5 percent revenue growth and a degrowth of 1 percent in operating profits in Q1 FY25, it said.

SBI economists have, however, retained their 7.5 percent growth estimate for the fiscal year 2024-25, which is higher than the 7.2 percent made by the RBI.

The report said the global economic outlook remains uncertain, and the persistent geopolitical tensions, rekindled fears of a potential recession on signs of weaker than expected labour market outcomes in key economies and financial market volatility in response to monetary policy divergence cast a shadow on prospects.

On the positive side for India, the South West monsoon picked up from early July, closing the deficit, it said, noting that as of August 25, the cumulative rainfall was 5 per cent above the LPA (long period average) against 7 percent below the LPA during the same period last year.