SBI sees India's Q1 GDP growth at 7.1 per cent with farm sector bouncing back

The Indian economy is expected to grow at 7.1 per cent in the first quarter (April-June) of the current financial year with the farm sector posting a robust performance, according to a report by SBI Research.

The estimate is in line with the RBI's projection for India's GDP growth of 7.2 per cent for 2024-25 with growth for Q1 expected at 7.1 per cent, Q2 at 7.2 per cent, Q3 at 7.3 per cent, and Q4 at 7.2 per cent.

SBI Research, in its latest Ecowrap report, observed that the Indian economy remained resilient despite headwinds from supply chain pressures, including rising global freight and container costs, and semiconductor shortages.

The report expects the country's agricultural growth to bounce back to 4.5-5 per cent in FY25 which is 0.3 per cent higher than the RBI's forecast, as the southwest monsoon has revived nationwide.

After a lacklustre performance in June, the southwest monsoon picked up momentum in early July, closing the deficit.

As of August 25, 2024, the cumulative rainfall was 5 per cent above the LPA as against 7 per cent below the LPA during the same period last year.

This has boosted the kharif crop sowing with the total sown area at 103.1 million hectares as of August 20, 2024, which is 2 per cent higher than the same period last year.

The report states that although the global economic growth outlook remains uncertain, softening inflation has made space for monetary policy easing.

The Economic Survey tabled in Parliament last month "conservatively" projected India's real GDP growth at 6.5-7 per cent for 2024-25. The report factored in uncertainties in the global economy amid escalating geopolitical tensions and tightening monetary policies which hurt growth.

However, Chief Economic Adviser Anantha Nageswaran said that achieving a 7 per cent GDP growth rate "is doable" for India despite the global environment having become more challenging since the beginning of the year.

"We were more confident of a 7 per cent GDP growth when we wrote the interim economic survey in January. Since then, the global environment has become even more polarised. Given that, we feel 7 per cent is doable, but yet we want to be not necessarily cautious but prudent," Nageswaran said.

On the global economy, the SBI report stated that the economic growth outlook remains uncertain, but the softening of inflation has created room for monetary policy easing.

India has continued to be a bright spot amid the global economic slowdown with a robust growth rate of 8.2 per cent for the financial year that ended on March 31, 2024.

In July, the International Monetary Fund (IMF) raised India's growth projections for 2024 from 6.8 per cent to 7 per cent, reinforcing the country's status as the fastest-growing economy among emerging markets and developing economies.