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NATO Eases Defence Spending Demand Following Spain's Objection to 5% GDP Commitment

GDP likely grew by a median 6.3% in Q3, slightly higher than RBI’s 6.2% estimate

GDP likely grew by a median 6.3% in Q3, slightly higher than RBI’s 6.2% estimate

 

Overview

In spite of challenges in global geopolitics and trade or supply chains being vulnerable to the tides of re-globalization, the Indian economy has been resilient in its stance. Based on SBI’s internally created Nowcasting Model which uses 36 high frequency indicators, SBI projects that GDP growth for Q3 FY25 would be between 6.2% and 6.3% (data coming on February 28). SBI projects the FY25 full year GDP to be 6.3%, assuming that NSO does not announce any significant changes to the previous Q1 and Q2 data.

 

Further, according to the median of 16 experts’ forecasts, India’s GDP grew at a rate of 6.3% in October-December, up from 5.4% in July-September, primarily as a result of a general uptick in economic activity. GDP must increase by 7.3% to 7.3% in Q4 in order to average 6.4% for the entire fiscal year if Q3FY25 growth is 6.3%.  GDP increased 6.7% in the first quarter and 5.4% in the second.

 

Global Growth to be stable

The deceleration in Q3CY24, influenced by escalating geopolitical issues, supply chain disruptions, and resulting imported inflation pressures, was not unique to India. Nonetheless, India still maintained its position as one of the fastest-growing economies.

The International Monetary Fund (IMF) has kept its growth forecast for India at 6.5 percent for FY26 and FY27, stating that this aligns with the country’s potential.  India’s growth has slowed more than anticipated, primarily due to a sharper decline in industrial activity, according to the IMF’s update on the World Economic Outlook (WEO), which noted the unexpected 5.4 percent growth rate for the September quarter.

The IMF’s growth prediction is lower than that of the World Bank, which has also upheld its growth estimate for India. India is expected to continue having the highest growth rate among the world’s largest economies, projected at 6.7 percent for both FY26 and FY27. The services sector is likely to experience consistent growth, while manufacturing is expected to gain momentum, bolstered by government efforts to improve logistics infrastructure and enhance the business climate through tax reforms, according to the World Bank’s key report on Global Economic Prospects.

 

Key Economic Indicators

Key indicators are demonstrating significant growth across every sector, including consumer spending, investment demand, industry, and services—pointing to strong momentum. A rise in Q3FY25 growth is indicated by 36 key indicators that SBI tracks, including those related to industry, services, agribusiness, and consumption and demand.  In Q3FY25, 74% of indicators showed acceleration, up from 71% in Q2FY25. Based on monthly statistics, GDP growth as measured by the SBI Composite Leading Indicator (CLI) Index—a basket of 36 leading indicators that incorporates criteria from nearly every sector—indicates a modest increase in economic activity in Q3.  This surge in Q3FY25 economic activity suggests that GDP might climb between 6.2 and 6.3%.

 

RBI hints on recovery in Q3

High frequency indicators suggest that the economy is on a “path of recovery” during H2FY25 from the “loss of momentum” observed in the first half, according to the Reserve Bank of India’s (RBI) February bulletin.

A recovery in overall momentum is also indicated by a pick-up in tractor sales growth, fuel consumption, and steady increases in air passenger traffic.  Rural demand continues to remain up, buoyed by increased farm incomes, stated the bulletin.

According to the bulletin, fast-moving consumer goods (FMCG) companies’ sales in rural areas increased by 9.9% in Q3FY25, which was much higher than the 5.7% growth in Q2.  According to the report, urban demand also showed signs of recovery, growing by 5% in Q3, which was almost twice as much as the 2.6% growth in the previous quarter.

 

India Inc earnings boost

About 4000 corporations in the listed sector reported a 6.2% increase in revenue in Q3FY25 compared to Q3FY24, while EBIDTA and profit after tax (PAT) increased by about 11% and 12%, respectively.

Additionally, compared to Q3FY24, Corporate ex BFSI, which is represented by over 3400 listed businesses, showed revenue and PAT growth of 5% and 9%, respectively, in Q3FY25.

 It is important to note that, in contrast to the negative EBIDTA growth in the previous two quarters of FY25, the same group of businesses reported EBIDTA increase of about 5% in Q3FY25. Overall, the EBIDTA margin increased from 14.4% in Q2FY25 to 14.84% in Q3FY25, an improvement of about 44 basis points. In Q3FY25 (YoY), corporate GVA increased by almost 300 basis points to 9.55%.

 

Conclusion

With strong GDP forecasts driven by rising demand, industrial activity, and government policy, India’s economy is strong despite international headwinds. Corporate performance and RBI indicate a turnaround, which also gives a boost to confidence in sustainable growth. India’s economy will likely boast fast growth growth rate globally.

 

The image added is for representation purposes only

Maruti Suzuki sets the target of regaining 50 percent auto market share in India

 

 

 

 

NATO Eases Defence Spending Demand Following Spain's Objection to 5% GDP Commitment

India's Q1 Growth Slows to 6.7% Amid Soft Consumer Spending

India’s Q1 Growth Slows to 6.7% Amid Soft Consumer Spending

India’s economic landscape has shown a mix of resilience and moderation in the first quarter of the fiscal year 2024-25. The latest GDP data, released by the National Statistical Office, paints a picture of an economy that’s still growing, albeit at a slower pace than previous quarters.

The headline number that’s grabbed attention is the 6.7% GDP growth rate for Q1 FY25. The economy’s pace has eased compared to the previous year’s same period, when it expanded at a more robust 8.2% rate.  It’s worth noting that this is the slowest growth rate India has seen in 15 months, which naturally raises some eyebrows.

What’s behind this slowdown?  Household expenditure, typically a crucial driver of economic growth, has underperformed expectations, dampening overall economic momentum. This softness in household expenditure has contributed to the overall slowdown in growth, as consumers appear to be more cautious with their wallets. The reasons behind this restraint in spending could be varied, ranging from economic uncertainties to shifts in consumer priorities. This trend warrants attention, as robust consumer activity is typically crucial for sustaining economic momentum and fostering broader economic health. Additionally, government spending hasn’t been as robust as in previous quarters. These elements combined have contributed to the more modest growth figure.

For comparison, China, often seen as India’s economic rival, posted a growth rate of 4.7% in the same period. This underscores India’s continued economic dynamism, even in the face of global challenges.

A closer look at different sectors reveals varied performance. Agriculture, a key pillar of the economy and major employer, showed modest growth at 2%. This represents a slowdown from last year’s 3.7% expansion in the same period. Given agriculture’s crucial role in rural livelihoods and national food supply, this deceleration raises some concerns about its broader economic impact.

On a more positive note, the manufacturing sector showed signs of revival. It registered a 7% growth, up from 5% a year ago. This uptick in manufacturing is encouraging, as it often translates to job creation and increased economic activity across various supply chains.

The services sector, particularly financial, real estate, and professional services, saw a moderation in growth. It expanded by 7.1%, which is still robust but marks a significant slowdown from the 12.6% growth seen in the previous year. This sector has been a strong performer for India in recent years, so this deceleration will be closely watched in coming quarters.

Looking ahead, there’s cautious optimism among economists and policymakers. The Reserve Bank of India (RBI), while acknowledging the slowdown, has maintained its full-year growth forecast at 7.2% for FY25. This suggests confidence in the economy’s ability to regain momentum in the coming quarters.

RBI Governor Shaktikanta Das has highlighted several positive factors that could support growth going forward. He pointed to the pickup in agricultural activity, which could boost rural consumption. There’s also evidence of increasing private corporate investment, with capacity utilization reaching an 11-year high. These are important indicators of business confidence and potential future growth.

The central bank’s focus remains firmly on managing inflation while supporting growth. The RBI seems optimistic about food inflation potentially softening, thanks to favorable monsoons and improving agricultural output.

It’s interesting to note the RBI’s stance on monetary policy at this juncture. They view the current steady growth as an opportunity to focus unambiguously on bringing inflation down to target levels. This suggests that we might not see significant changes in interest rates in the near term, as the RBI prioritizes price stability.

As we look at these numbers and projections, it’s important to remember the broader context. India, like many economies, is navigating a complex global environment. Factors such as geopolitical tensions, fluctuating commodity prices, and the lingering effects of the pandemic continue to influence economic performance.

Moreover, India’s economic story is not just about numbers. It’s about the millions of people whose lives are impacted by these economic trends. The slowdown in agricultural growth, for instance, could affect rural incomes and consumption patterns. On the flip side, the uptick in manufacturing could create new job opportunities in urban and semi-urban areas.

The coming quarters will be crucial in determining whether this slowdown is a temporary blip or a sign of more persistent challenges. Policymakers, businesses, and citizens alike will be keenly watching how various sectors perform, how global economic conditions evolve, and how government policies adapt to these changing circumstances.

In conclusion, while the 6.7% growth rate for Q1 FY25 represents a moderation from previous quarters, it still positions India as a growth leader among major economies. The mixed performance across sectors suggests both challenges and opportunities ahead. As the year progresses, it will be fascinating to see how India balances its growth aspirations with the need for economic stability and inclusive development. The resilience and adaptability of India’s economy will undoubtedly be put to the test, but if history is any indication, there’s reason for cautious optimism about the country’s economic trajectory.

The image added is for representation purposes only

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RBI's Strategic Cuts: A New Era of Economic Growth Begins

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