SBI Report : India’s GDP To Touch 6.5% in Q2 FY25

India’s GDP is set to grow at 6.5% for the second quarter of this fiscal year, a report by the State Bank of India stated.

Though the country witnessed a slight dip in Q2 (Jul-Sep), the bank highlighted increasing rural demand, which is an indicator of improved income levels.

The report said, “The blip in growth in Q2 might be an impasse, tailwinds of recovery is now reinvigorated by a surge in rural demand… a proxy of better income levels.”

It also observed that growth in the third and fourth quarter can result in overall GDP growth of 7% for FY25.

“We estimate Q2FY25 GDP growth around approx 6.5 percent,... and, expected Q3 and Q4 growth could push overall yearly GDP growth closer to 7% in FY25.”

Rural demand has remained resilient, buoyed by high consumer sentiment. This indicates that government initiatives are benefiting the lower strata of the population. Rural consumer sentiment in the first half of FY25 remained above 100 and is matching up the pace with urban consumers.

It said, “In all months of H1-FY25, rural consumer sentiment is more than 100 and gradually converging to that of urban consumer sentiment.”

However, the report cautioned against the reversal of any policy decisions, which are potent in creating short-term fiscal pressures. It shunned initiatives including loan waivers and universal crop guarantees as ‘unscientific’.

“Policy mistakes promising undesirable short term fiscal bonanza like loan waivers, unscientific and universal crop price guarantees could be avoided”, the report claimed.

Notably, higher consumer sentiment in rural areas can ‘lead to higher consumer spending, thus supporting rural markets, job creation and income generation’