Economic Growth Momentum To Accelerate In H2FY25: Icra
Despite a pick-up in economic activity in September 2024, GVA growth to record an intermittent dip in Q2FY2025, doused by excess rainfall
Rating agency Icra expects the slowdown in economic growth in Q2 FY2025 to be transient. It foresees the gross value added (GVA) growth to improve to above 7.0 per cent in H2FY2025 aided by tailwinds stemming from a pick-up in rural demand after the favourable monsoon turnout and kharif sowing, which would particularly aid in boosting the consumption during the festive and marriage seasons.
The agency stated that besides, there is a large headroom available for the Government’s capex in the remaining months of the fiscal, amid tepid spending during April-August 2024, which would particularly augur well for the growth in investment activity in H2FY2025.
The year-on-year (YoY) growth in the Icra business activity monitor rose to 7.2 per cent in September 2024 (+9.7 per cent in September 2023) from a 16-month low of 6.1 per cent YoY in August 2024 (+11.2 per cent in August 2023), partly aided by a favourable base, with nine of the 15 constituent indicators witnessing an improvement in their growth performance.
The performance of 2W output (to +12.9 per cent from +4.7 per cent) and GST e-way bills (to +18.5 per cent from +12.9 per cent; amid pre-festive stocking) improved significantly between these months. While the pace of expansion in finished steel consumption (to +10.5 per cent from +10.7 per cent) eased in September 2024 vis-à-vis August 2024, it remained in double digits for the eighth consecutive month.
The YoY contraction in Coal India's output (to -1.0 per cent in September 2024 vs. -11.9 per cent in August 2024), electricity generation (-1.7 per cent vs. -3.8 per cent; partly aided by favourable base) and diesel consumption (-1.9 per cent vs. -2.5 per cent) narrowed sharply in September 2024 vis-à-vis August 2024, thereby exerting a lower drag on the growth in the Index.
According to the Icra, the continued decline in these indicators largely reflects the impact of excess rainfall (11 per cent above LPA in September 2024).
In contrast, the YoY performance deteriorated in September 2024 vis-à-vis August 2024 for some auto/mobility-related indicators including vehicle registrations (to -9.1 per cent in September 2024 from +3.6 per cent in August 2024; partly on account of the shift in the Shraadh period), PV output (to -3.4 per cent from +0.7 per cent, production cuts by wholesalers to realign high dealership inventory with demand), and petrol consumption (to +3.0 per cent from +8.6 per cent).
The growth in port cargo traffic also eased slightly (to +5.9 per cent from +6.7 per cent; led by a contraction in coal shipments) between these months, despite a favourable base.
