heavy rain And due to weak corporate performance, India's real GDP growth rate is likely to decline to 6.5 percent in the July-September quarter. Domestic rating agency ICRA, however, has maintained its growth forecast for the entire financial year at seven percent amid expectations of an uptick in economic activity in the second half of the financial year 2024-25 (October 2024-March 2025). These estimates and comments come at a time when there are concerns of a slowdown in growth due to a number of factors such as weak urban demand.
Chances of recession in mining and power sector
The Reserve Bank of India has estimated the economic growth rate for the current financial year 2024-25 to be 7.2 percent, which is lower than 8.2 percent in 2023-24. Official data on economic activity for the second quarter is expected to be released on November 30. GDP growth in the first quarter (April-June) was 6.7 percent. Icra said the decline in the second quarter would be due to factors such as heavy rains and weak corporate performance. “Although there are positive trends driven by government expenditure and kharif sowing, the industrial sector, especially mining and power, is likely to see a slowdown,” it said.
Benefit of good monsoon will be available in future
Aditi Nair, chief economist at the rating agency, said, “The second quarter of FY 2024-25 saw good growth in sowing of major Kharif crops along with an increase in capital expenditure after the general elections. Many areas faced adverse conditions due to heavy rainfall, which affected mining activity, power demand and number of retail customers and also reduced merchandise exports. He said that the benefits of good monsoon will be further enhanced and Kharif production Rural demand is likely to improve continuously due to increase in water supply and refilling of reservoirs. “We are also keeping an eye on the impact of the slowdown in personal credit growth on private consumption as well as the impact of geopolitical developments on commodity prices and external demand,” the chief economist said.
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