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Bank of Baroda (BoB) has projected that India's Gross Domestic Product (GDP) growth will reach 6.9% in the second quarter of the fiscal year 2024-2025, surpassing the 6.7% growth rate recorded in the first quarter, according to a recent report. The forecast attributes this uptick in growth to a combination of strong domestic demand and favourable trends in high-frequency economic indicators, as per ANI.
The report from BoB states, "On the domestic front, GDP data for Q2 is awaited, and we expect growth at 6.9% versus 6.7% in Q1." According to BoB, the upcoming festive season, which began in September and extended into October, has further boosted demand across various sectors. This rise in consumption is evident in several indicators, including an increase in air passenger volumes and the Services Purchasing Managers' Index (PMI), which reflects heightened activity in the services sector.
Additionally, the report notes an increase in toll collections, vehicle registrations, and non-oil, non-gold imports towards the close of Q2 and the beginning of Q3. These trends suggest greater mobility and consumer activity, demonstrating a broad-based improvement in economic sentiment and consumer confidence.
According to ANI, both central and state government expenditures have also contributed to this acceleration, driving growth in public infrastructure and related areas. Digital payments and auto sales have shown a marked recovery as well, aligning with the overall rise in consumption metrics, as stated in the report. Manufacturing and services PMI data indicate balanced growth across sectors, suggesting that both manufacturing and service industries are contributing positively to the economic expansion.
The Reserve Bank of India's (RBI) consumer confidence survey conducted in September has shown stable household sentiments, while rural demand has experienced a notable recovery. Two-wheeler and tractor sales, important indicators of rural economic health, have rebounded, signalling positive trends in rural areas.
However, BoB's report also highlights persistent inflationary pressures, with price data for October reflecting elevated levels. This could influence the RBI's monetary policy in its December meeting. The central bank is likely to keep interest rates steady in response to sustained economic growth, though a potential rate cut may be considered by February 2025, depending on inflation trends.
The report also mentions a slight deceleration in credit growth across sectors, a trend that may impact the broader economic momentum in subsequent quarters. Slowing credit growth can lead to reduced investments, which may temper the pace of expansion if it persists.
Overall, the report from BoB emphasises that a combination of factors, including festive demand, rising consumer confidence, and positive rural and urban economic indicators, is helping to maintain India's growth trajectory. With the GDP data for Q2 expected on 29 November, the Ministry of Statistics and Programme Implementation (MoSPI) will soon release official figures to confirm the forecast, according to ANI.
According to the BoB report, the economy is positioned for steady growth in the latter half of the fiscal year, bolstered by sustained demand, a robust services sector, and a stable consumption environment across both urban and rural areas.
