SBI Research Anticipates Q1 GDP Growth At 7.1%, In Line With RBI Forecast

India’s Gross Domestic Product (GDP) is projected to grow by 7.0 per cent to 7.1 per cent in the first quarter of the fiscal year 2024-25 (Q1FY25), according to the latest SBI Ecowrap report released on August 26. However, there is a slight downside risk to this estimate, with manufacturing Gross Value Added (GVA) expected to be lower, ranging between 6.7 per cent and 6.8 per cent. 

What are the reasons for the sluggish performance of the manufacturing sector?

The manufacturing sector’s sluggish performance is attributed to subdued corporate earnings during the quarter. The report highlights a slowdown in sales growth for manufacturing companies, both in nominal and real terms. As a result, the sector is likely to contribute less to the overall gross domestic product growth. 

Ecowrap report

• The Ecowrap report authored by Group Chief Economic Adviser Soumya Kanti Ghosh further noted that the Indian economy remained resilient despite challenges from supply chain pressures, including rising global freight and container costs and semiconductor shortages.
• The Ecowrap report detailed that approximately 4,000 listed companies experienced modest growth in Q1FY25, with a 9 per cent increase in both top-line and bottom-line figures compared to the same period in the previous year.

Decline in BFSI

When excluding the banking, financial services, and insurance (BFSI) sectors, corporate top-line growth stood at just 5 per cent, while earnings before interest, taxes, depreciation, and amortization (EBITDA) declined by 1 per cent compared to a 23 per cent growth in Q1FY24. This decline has led to a significant drop in corporate gross value added growth, which fell to 10.9 percent in Q1FY25 from 17 percent in Q4FY24. 

Growth in agriculture sector

In contrast, the agriculture sector is showing signs of revival, driven by improved monsoon activity. The report expects agricultural growth to rebound to 4.5-5 per cent, adding around 30 basis points to the Reserve Bank of India’s (RBI) forecast.

Cumulative rainfall across the country

As of August 25, 2024, cumulative rainfall across the country was 5 per cent above the long-period average (LPA), a sharp improvement from the 7 per cent deficit recorded during the same period last year. 

Strong agricultural performance

Hence, despite the challenges in the manufacturing sector, the Indian economy remains resilient, bolstered by strong agricultural performance and easing inflation, this will pave the way for future monetary policy adjustments.