India's GDP growth forecasted at 6.5% for Q2 FY25, with FY25 growth approaching 7%: SBI

SBI projects India's GDP growth at 6.5 percent for Q2 FY25, with a positive outlook for the second half, potentially bringing annual growth closer to 7 percent. Rural demand is expected to drive recovery.

India's GDP growth for the second quarter of the current fiscal year is expected to be around 6.5 per cent, according to a report by the State Bank of India (SBI). The report acknowledged a slight dip in growth for Q2 but suggested that this slowdown might be temporary, citing a recovery driven by rising rural demand, which is seen as a sign of improved income levels.

"The blip in growth in Q2 might be an impasse. Tailwinds of recovery are now reinvigorated by a surge in rural demand, a proxy of better income levels," the report stated. The report also highlighted that October had shown signs of a recovery, and growth in the third and fourth quarters could bring the overall GDP growth for FY25 closer to 7 per cent.

"We estimate Q2FY25 GDP growth around 6.5 per cent... and the expected Q3 and Q4 growth numbers could push overall yearly GDP growth closer to 7 per cent in FY25," the report stated.

The report also emphasised the need to capture "soft data" accurately to reflect changing consumer behaviours, particularly as the trend of quick commerce (Q-commerce) continues to gain traction in urban areas. It noted that rural demand has been robust, underpinned by high consumer sentiment. This indicates that government initiatives aimed at supporting lower-income populations are making a positive impact.

"Over the first half of FY25, rural consumer sentiment has consistently remained above 100 and is gradually aligning with urban consumer sentiment levels," the report said.

However, the SBI report cautioned against policy decisions that might create short-term fiscal pressures. It specifically advised against measures like loan waivers and universal crop price guarantees, which it described as "unscientific" and potentially harmful for long-term economic stability.

"Policy mistakes promising undesirable short-term fiscal bonanza, such as loan waivers and unscientific universal crop price guarantees, should be avoided," the report stated.

The report highlighted the positive implications of higher consumer sentiment in rural areas, noting that this would likely lead to increased consumer spending, which would support rural markets, job creation, and income generation. This upward trend in rural demand is expected to contribute to the broader economic growth, helping India's GDP stay on track for a strong finish to FY25.

(With inputs from ANI) 

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