According to State Bank of India (SBI’s) Economic Research Department (ERD) report- ‘Ecowrap’ , India’s Gross Domestic Product (GDP) is expected to grow by 7.0% to 7.1% in 1st Quarter (Q1: April-June) of Financial Year 2024-25(FY 25). It has also projected that Gross Value Added (GVA) will be in the range of 6.7% to 6.8% with a downward bias.
- This growth projection is in alignment with the Reserve Bank of India (RBI)’s forecast for India’s GDP growth for FY25 which will be 7.2%, 7.1%, 7.2%, 7.3% and 7.2% for whole FY25, Q1FY25, Q2 FY25, Q3 FY25 and Q4 FY25 respectively.
- These projections are made by using SBI’s ‘Nowcasting Model’ which is based on 41 high frequency indicators associated with industry activity, service activity, and global economy. It uses dynamic factor model to estimate the latent factor of all 41 high frequency indicators from Q4 (January-March) of FY13 (2013-14) to Q1 of FY25.
GDP Growth and Outlook: Q1FY25
i.The report cited that global economic growth outlook remains uncertain. It highlighted that persistent geopolitical tensions may pose the risks of recession due to weaker than expected labour market outcomes in major economies and financial market volatility in response to monetary policy divergence.
ii.As per the report, the rate of global disinflation is slowing but, warranting caution in easing monetary policies.
Growth Decrease in Manufacturing Sector:
i.The report revealed that staff costs has increased in the manufacturing sector, but debt servicing capability measured in terms of the interest coverage ratio remained stable, due to these factors the profit margins have declined and this will decrease the growth of manufacturing sector.
ii.The report underscored that the growth of Indian economy remained resilient despite headwinds from supply chain pressures due to increase in global freight and container costs, and shortages of semiconductor.
iii.The decrease in manufacturing GVA is mainly driven by indicators of corporate performance in Q1FY25 which indicates towards moderate growth in sales of manufacturing companies both nominal and real terms , except the petroleum sector, a better outturn emerges.
About Corporate India:
i.The report showed that India Inc. in Q1FY25, around 4,000 listed entities reported a top-line as well as bottom-line growth of 9%, as compared to Q1FY24.
ii.However, when Banking Financial Services, and Insurance(BFSI) sectors were excluded, the corporate houses registered only 5% growth in top line with negative growth in Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA) of -1% in Q1FY25 as compared to growth of 23% in Q1FY24.
- While, corporate GVA increased by around 10.9% in Q1FY25 as compared to 17% in Q4FY24 and 26% in Q3FY24.
iii.As per the report, the combined EBITDA margin has also decreased by around 100 basis points (bps) in Q1FY25 for the said corporate.
Positive Growth in Agriculture Sector:
i.The report estimated that agricultural growth to rebound to 4.5% to 5% in FY25, which is around 30 bps more than RBI forecast.
ii.The report cited that following the lackluster performance in June 2024, South West (SW) monsoon picked up from early July which close the rainfall deficit.
- Further, the cumulative rainfall recorded, as on 25th August 2024, was 5% above Long Period Average (LPA) as against 7% below the LPA during the same period last year.
- This has increased the kharif crop sowing with the total sown area at 103.1 million hectares (ha) (94% of full season normal area) as of 20th August 2024, which is 2% higher than the same period last year.
About State Bank of India(SBI):
Chairman- Challa Sreenivasulu Setty (with effect from 28th August 2024)
Headquarters- Mumbai, Maharashtra
Tag line-“The Banker to Every Indian”
Founded in- 1st July 1955
