For the full fiscal year 2024-25, ICRA expects GDP growth of 6.8%, down from 8.2% in 2023-24.

The rating agency said: “ICRA forecasts year-on-year (YoY) GDP growth to moderate from 7.8 percent in the fourth quarter of FY2024 to a six-quarter low of 6 percent in the first quarter of FY2025, amid a cut in government capital expenditure and a decline in urban consumer confidence.”

Official data on third quarter growth will be released by the Ministry of Statistics and Programme Implementation (MoSPI) on August 30. In the first quarter (Q1) of 2023-24, the growth rate was 8.2%.

Aditi Nayar, chief economist, ICRA, cited several factors that contributed to the projected slowdown in the June quarter of the current fiscal year. According to her, there was a temporary lull in various sectors during this quarter due to the general elections and sluggish government investments at the federal and state levels. In addition, she mentioned an unexpected decline in urban consumer confidence as per the Reserve Bank of India's consumer confidence survey. Moreover, the lingering impact of last year's unfavourable monsoon conditions and an uneven onset of the 2024 monsoon prevented an overall improvement in rural sentiment.

“Lower volume growth coupled with diminishing gains from commodity prices weighed on the profitability of some industries. The heatwave also impacted footfall in various services sectors, even as it boosted power demand significantly. Overall, we project a temporary moderation in India's GVA (gross value added) and GDP (gross domestic product) growth in the first quarter of FY2025 to 5.7 percent and 6 percent, respectively,” Nayar said. For the full FY2025, ICRA expects a subsequent revival in economic activity that would push GDP and GVA growth to 6.8% and 6.5%, respectively. Nayar pointed out that the Indian government's capital expenditure during July-March 2025 has significant scope to increase by 39% year-on-year to meet the full-year budget estimate. This is expected to push GDP growth above 7% in the second half of FY 2025. ICRA's findings suggest a temporary slowdown in India's economic growth, with several sectors experiencing a downturn influenced by government policies, urban consumer sentiment and weather conditions. However, a recovery is forecast in the second half of the fiscal year.