SBI trims FY25 GDP growth forecast to 6.3% amid lending and manufacturing slowdown
Mumbai: The State Bank of India (SBI) has revised its GDP growth forecast for India in the 2024-25 financial year (FY25) to 6.3 percent, slightly below the National Statistical Office’s (NSO) projection of 6.4 percent, media reports said.
The revision follows the Ministry of Statistics and Programme Implementation’s release of GDP projections on Tuesday.
SBI cites economic challenges such as a slowdown in lending and manufacturing.
SBI attributed its downgrade to a general slowdown in aggregate demand, compounded by a significant base effect from the previous year.
“Historically, the difference between RBI’s estimate and NSO’s estimate is always in the range of 20-30 bps and hence the 6.4 percent estimate of FY25 is along expected and reasonable lines. We, however, believe that GDP growth for FY25 could be around 6.3 percent, with downward bias,” SBI noted in its forecast.
The NSO’s first advance estimates for FY25 project a GDP growth rate of 6.4 percent, marking a sharp decline from 8.2 percent in FY24.
Gross value added (GVA) is also expected to grow by 6.4 percent.
Despite these challenges, per capita nominal GDP is set to rise significantly, with an increase of Rs 35,000 compared to FY23.
The NSO data indicates a stronger outlook for agriculture and allied activities, with growth projected at 3.8 percent in FY25, up from 1.4 percent in FY24.
This improvement is attributed to robust policy initiatives and public infrastructure development.
In contrast, industry and services sectors are expected to experience slower growth. Industry growth is forecast at 6.2 percent for FY25, down from 9.5 percent in FY24, while services are projected to grow at 7.2 percent, a marginal decline from 7.6 per cent in the previous year.
Government consumption is likely to support the economy, with nominal growth expected at 8.5 percent and real growth at 4.1 percent.
However, weak performance in the manufacturing and services sectors remains a significant hurdle to sustaining higher growth rates.
Private consumption has emerged as a key growth driver, projected to grow at a real rate of 7.3 percent in FY25, compared to 4 percent in FY24.
This increase is underpinned by strong agricultural performance and reduced food inflation.
Nevertheless, investment growth has slowed, expected at 6.4 percent in FY25, down from 9 percent in FY24, with limited prospects for recovery in the year’s second half.
“Empirical evidence does suggest a slowdown in credit will push a slowdown in GDP,” SBI remarked, explaining its projections.
The NSO’s advance estimates align closely with SBI’s forecast, predicting a 6.4 percent real GDP growth for FY25.
The first half of the financial year is expected to grow at 6 percent, with a rise to 7 percent in the second half.
Despite these projections, weak private investment continues to pose challenges.
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