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Below the Perspective on GDP Data by Ms. Ms. Rajani Sinha, Chief Economist, Emkay Global Financial Services 

“In the first quarter of FY25, GDP growth was recorded at 6.7%. The GVA growth stood at 6.8%, surpassing GDP growth and reversing the trend observed in the previous two quarters, where the GDP-GVA gap averaged 160 basis points.

The agriculture sector growth improved to 2% after previous two quarters of sub 1% growth. However, agri sector growth remained below the long-term average of approximately 3.7%. The sector was impacted by lower reservoir levels due to last year’s poor monsoon and heatwaves. Manufacturing growth slowed as anticipated, reflecting the moderation seen in IIP data and corporate profitability in Q1. Construction sector showed further improvement, while the services sector maintained strong growth, particularly in trade, hotels, transport, communication and broadcasting services, and public administration services.

On a positive note, the private final consumption expenditure saw a significant recovery. This bodes well for sustained growth momentum in the coming quarters. Overall Gross Fixed Capital Formation exhibited robust growth of 7.5%, surpassing the previous quarter’s performance. This is despite a contraction in the Centre’s capital expenditure in Q1. This suggests increased capex by households and private sector. Notably, household investment in real estate has remained particularly strong post-pandemic. Overall exports also performed well led by double digit growth in petroleum and services export in Q1. However, the contraction in government expenditure, influenced by election-related restrictions impacted the growth numbers.

For the full year FY25, we anticipate GDP growth to be 7%, slightly below the RBI’s projection of 7.2%. In the subsequent quarters, the agricultural sector is expected to see improved growth due to a good monsoon, despite ongoing challenges pertaining to its distribution. An increase in the government’s capital expenditure in the upcoming quarters and further pick-up in private capex will further support overall growth. Moreover, agri sector recovery and lower inflation will provide boost to consumption recovery in the coming quarters.”

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