India's first quarter GDP growth slows down, falls short of RBI forecast
India's GDP growth for the first quarter of FY25 slowed to 6.7%, the lowest in five quarters, down from 7.8% in the previous quarter. This figure falls short of the Reserve Bank of India's (RBI) forecast of 7.2% and is notably lower than the 8.2% growth recorded in Q1FY24, as per government data released on August 30.
The slowdown has been attributed to reduced government spending, potentially due to election activities and adverse effects from heatwaves during the quarter. Industrial production saw a slight improvement, growing at 5.2% compared to 4.7% in the same period of 2024. However, capital expenditure utilisation dropped sharply, with the government spending only 16.3% of its budget estimates in Q1FY25, down from 27.8% the previous year.
Aditi Nayar, Chief Economist at Icra, noted a significant decline in investment activity, with central and state government capital expenditure contracting by 35% and 23% year-on-year, respectively. Despite this slowdown, India's economy is still projected to maintain a growth rate above 7% for the fourth consecutive year, with Moody's Ratings recently revising its growth forecast for 2024 upwards to 7.2%. The RBI continues to project a 7.2% growth rate for FY25.
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