‘GDP likely to grow at a slower 6.4%-6.6% in Q3FY25 on geopolitical pressures’

India’s Gross Domestic Product (GDP) is expected to grow at a slower rate of 6.4% to 6.6% in the third quarter of fiscal 2025 (FY25) as opposed to 8.6% in the same period last year on account of global uncertainties spilling over to the Indian economy. 

Bank of Baroda (BoB) projected a GDP growth rate of 6.6% in the reporting quarter while ICRA estimated the economy would expand at an even slower pace of 6.4%. While a slower growth is expected on a yearly basis, it is a recovery from the seven-quarter low of 5.4% clocked in Q2FY25.

“Indian economy remains one of the fastest-growing, though adverse impact due to global headwinds are already visible due to pressure on currency and a possible impact on external sector” said Jahnavi Prabhakar, economist at Bank of Baroda (BoB).

The growth rate is uneven across sectors, noted Ms. Prabhakar in her research note. Agriculture and public administration would be the only sectors that would see an increase in growth in the reporting quarter, BoB estimated in its research note. Growth in farm sector output is expected to come in at 4.5% in the reporting quarter as opposed to 0.4% in the year ago period. Public administration growth is projected at 8.1% in Q3FY25 as against 7.5% in the last fiscal.

Industrial sector growth may come in at a slower 5.9% in Q3FY25 as against 10.2% in the year ago period. The slowdown in manufacturing may partially be due to a higher base in the same quarter last year, she said. Services is also expected to come in at a slower pace of 6.9% in the reporting quarter against 7.1% in the year ago period.

Increased rural demand, and uptick in government spending is expected to spruce up growth in Q4FY25, said BoB research adding that high frequency indicators support the outlook. GST collections in January 2025 grew 12.3% on a year-on-year basis as opposed to about 7.3% in December 2024. Two-wheeler and tractor sales have recovered improving confidence in rural demand. Credit and deposit growth is expected to grow said BoB research.