India’s Q1FY25 Gross Domestic Product (GDP) growth was recorded at 6.7% YoY, down from 7.8% YoY in the previous quarter and below the RBI’s forecast of 7.1% YoY. However, Gross Value Added (GVA) recovered to 6.8% YoY from 6.3% in the previous quarter, as strong services sector activity offset the slowdown in manufacturing.

Manufacturing growth slowed to 7.0% YoY from 8.9% YoY in the previous quarter. This decline can be attributed to a decline in the operating profit growth of listed manufacturers and weaker IIP manufacturing.

Services activity remained robust at 7.7% YoY, driven by double-digit growth in construction (10.5% YoY), decent growth in Trade+ (5.7% YoY), and strong performance in Public Administration+ (9.5% YoY). Financial Services+ slowed to 7.1% from 7.6% in Q4, affected by a decline in deposit and credit growth.

Agricultural growth was muted at 2.0% YoY on account of poor rabi crop production.

On the expenditure side, private consumption recovered to 7.4% YoY in Q1 from 4.0% in the previous quarter. Fixed investment growth also remained robust at 7.5% YoY, showing no impact of general elections on investment activity. There was a net positive contribution from external trade as exports growth outpaced imports growth.

We expect FY25 GDP growth to be around 6.8% YoY. A normal and well-distributed monsoon is favourable for domestic growth. However, restrictive domestic monetary policy and financial market volatility pose downside risks to the outlook.

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