India to clock 7% GDP growth in FY25, says HSBC Global Research

The Indian economy is projected to grow 7% in FY25 despite a slowdown to 6.7% in the first quarter of FY25, marking the lowest growth rate in 5 quarters, according to HSBC Global Research. This positive outlook is supported by strong underlying growth momentum and the narrowing of key economic data gaps, as detailed in the report titled India GDP — Buoyant Momentum, Narrowing Gaps. In the first quarter of FY25, gross value adds (GVA) increased by 6.8%, up from 6.3% in the previous quarter. The Reserve Bank of India (RBI) estimates GDP growth at 7.2% for FY25, closely aligning with the International Monetary Fund’s (IMF) projection of 7%. The report also highlighted the narrowing of 4 significant economic gaps: between GDP and GVA, consumption and investment, industry and services, and exports and imports.

A notable development is the convergence of investment and private consumption growth after 6 consecutive quarters of higher investment growth (7.5% average) compared to private consumption (3.2% average). In the first quarter of FY25, GDP growth moderated to 6.7% annually, down from 7.8% in the previous quarter, due to a decline in government capital expenditure amid general elections and a drop in urban consumer confidence. Gross fixed capital formation (GFCF) grew to 34.8% annually in the first quarter of FY25, slightly up from 34.6% in the same period last year. The report also noted that industrial growth has outpaced services growth for the last 3 quarters. However, signs of convergence are emerging as industrial growth slows, primarily due to a decline in manufacturing. In contrast, services growth accelerates, driven by public and private services and trade and transport services. Normalizing temperatures after a heatwave in March is expected to improve food production and rural demand in the coming quarters.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.