GVA Growth To Decelerate To 5.7% In Q1FY25: Icra

The year-on-year (YoY) growth in the Icra Business Activity Monitor eased marginally to 9.7 per cent in the first quarter of the current financial year (Q1FY25) from 10.1 per cent in Q4FY24, with as many as 12 of the 17 indicators witnessing a deterioration in their growth performance. 

The rating agency Icra anticipates the gross value added (GVA) growth to moderate to 5.7 per cent in Q1FY2025 from 6.3 per cent in Q4FY2024.

However, YoY growth in the Icra business activity monitor improved to 9.8 per cent in June 2024 from 9.4 per cent in May 2024.

Nine of the 16 indicators witnessed a deterioration in their YoY growth performance in June 2024 compared to May 2024, Icra stated in the report. 

The moderation was led by some of the auto-related indicators including vehicle registrations, which registered a YoY growth of one per cent in June 2024 as heat waves impacted walk-ins whereas motorcycle output dipped to a nine-month low of 10.8 per cent YoY growth in June 2024.

However, the number of indicators reporting double-digit growth remained unchanged at seven in June 2024 in line with the previous month as steel consumption witnessed a YoY growth of 19.1 per cent in June 2024 as compared with 13.1 per cent in May 2024. Railway freight traffic jumped to a four-month high of 10.1 per cent YoY growth in June 2024 from 3.7 per cent in May 2024.

Given the weaker volume growth across most high-frequency indicators, dissipation of the benefit of deflation in global commodity prices, deficient and uneven rainfall in June 2024 and a slowdown in project execution and capital spending by the government of India due to the general elections, Icra has anticipated the GVA growth to moderate to 5.7 per cent in Q1FY2025. 

However, the extent of the slowdown in the GDP growth in Q1FY2025 would depend on the growth in indirect taxes as well as the magnitude of subsidies booked by the central and state governments in this quarter.

Trends for the July month appear to be mixed. As per the data provided on the Vahan portal, the average daily vehicle registrations stood at 55.5 thousand units from 1 to 16 July 2024, trending five per cent higher on a YoY basis, compared to the one per cent growth seen in June 2024. 

On the other hand, the YoY growth in all-India electricity demand moderated to 7.3 per cent on a YoY basis from 1 to 15 July 2024, down from 8.9 per cent in the previous month, as the monsoon gained momentum, according to Icra.