India’s economic growth is expected to pick up momentum in the third quarter of the financial year 2024-25 (Q3FY25), with GDP growth estimated at 6.2%, up from 5.4% in the second quarter (Q2FY25), according to a report by Union Bank of India.
The report highlighted that the negative gap between Gross Domestic Product and Gross Value Added (GVA) growth, which was observed in the first half of FY25 (H1-FY25), is likely to have neutralized in Q3FY25.
It said “We estimate Q3FY25 GDP growth rate to mark an uptick to 6.2% (5.4% in Q2FY25), as the negative gap between GDP and GVA growth observed in H1-FY25 probably became neutral in Q3FY25”
However, the report also pointed to a disconnect between the growth trends in net indirect taxes reflected in GDP data and fiscal data. It warned that the decline in net indirect taxes growth in fiscal data this quarter could pose a risk of continued negative GDP-GVA growth gap in Q3FY25 as well.
In addition to the Q3FY25 Gross Domestic Product data, the government will also release the second advance estimate for the full-year GDP of FY25. The report has kept its full-year GDP growth forecast unchanged at 6.4%, which would require economic growth of around 6.8% in the second half (H2) of the fiscal year, compared to 6% in H1FY25.
What Else For GDP Growth?
While the report acknowledged potential downside risks to its growth projection for FY25, it suggests waiting for any data revisions before adjusting its forecast. Past trends indicate that GDP estimates are often revised significantly, influencing the final figures.
Notably, in February 2024, the GDP data for Q3FY24 saw an upward revision due to downward adjustments in previous quarters’ figures. The report also stated that there is an upward risk to the Q3FY25 GDP projection of 6.2% if previous year numbers are revised downward. This revision trend has been observed in earlier GDP releases, which impacted the final estimates positively.
The upcoming GDP data release will provide a clearer picture of the country’s economic performance and help assess whether the growth momentum continues in the second half of FY25. The GDP data for third quarter of FY25 will be released on 28th February.
