Mumbai: The real gross domestic product (GDP) growth for the second half of FY25 is likely to be softer than the Reserve Bank of India’s (RBI) revised estimates, economists said, citing the latest suite of incoming high-frequency data contained in the minutes of the review of the rate-setting panel.
Economists project downside risks of up to 60 basis points to 6.4% to 6.6% in H2FY25, versus central bank projections of 7% for the traditionally busy season in the local economy. Such indicators for October and November, which coincided with the biggest festive month and the start to the wedding season in north India, remained mixed for both consumption- and investment-oriented sectors, economists said, analysing the minutes of the monetary policy committee (MPC) meeting.
The MPC minutes published Friday showed while there was agreement on the near-term growth-inflation balance turning adverse, differences cropped up in the assessment of underlying risks to growth and suitability of monetary policy tool in addressing supply side inflation. “Growth is expected to recover on the back of higher government and agriculture spending, but it is likely to be lower than RBI’s trajectory due to weaker exports and consumption spending as seen in auto sales during November and December,” said Sameer Narang, head of economics research, ICICI Bank.
Activity in the construction sector remains weak and the Centre’s capital expenditure, currently tracking lower than last year, is adding pressure on growth.
New Delhi will likely fall short of its capital expenditure target by approximately Rs 1.5 lakh crore, from its annual target of Rs. 11.1 lakh crore, showed a recent report by rating agency CareEdge.
Kotak Mahindra Bank forecasts second-half growth to be at 6.4%, while QuantEco’s forecasts stand at 6.7% to 6.8% for the same period.
Among the members who voted for a status quo on policy rates, the then governor Shaktikanta Das and Rajeev Ranjan were fairly optimistic on growth in the second half due to relatively higher government expenditure from the first half and improving agriculture outlook.
