Mixed Signals for Q3 as Growth Struggles to Meet Forecasts

The Economic Times reports that economic activity showed signs of improvement in the third quarter of fiscal year 2024-25, with indicators such as Unified Payments Interface (UPI) transactions and Goods and Services Tax (GST) collections rising. However, growth for the year is expected to remain subdued, falling below the Reserve Bank of India’s (RBI) forecast of 6.6%. The Union government will release its first advance estimates for gross domestic product (GDP) on Tuesday. Despite a low 5.4% GDP growth in the previous quarter, economists expect third-quarter growth to rise by at least one percentage point. However, the manufacturing Purchasing Managers' Index (PMI) declined, indicating mixed economic conditions.

According to the Finance Ministry's Monthly Economic Review, India's economy is expected to grow at 6.5% in FY25, following a lacklustre first half, with agricultural and industrial activity providing a rebound. The slowdown in the first half was partly attributed to the RBI's monetary policy stance, which kept key rates unchanged despite industry pressure. The Ministry remains optimistic for the second half, citing resilient rural demand and increased urban consumption, with growth in two-wheeler, tractor, and passenger vehicle sales. Increased government expenditure is anticipated to support sectors such as cement, steel, and mining.