The economy is expected to close the current fiscal with 6.3 percent growth, 10 bps lower than the government's advance estimate of 6.4 percent, and 30 bps lower than the RBI’s revised forecast, owing to many factors like weak demand and poor investments, stated a State Bank of India report on Wednesday.
The SBI report was released a day after the National Statistics Office (NSO) published its first advance estimates for 2024-25, which projected the economy to decelerate to a four-year low of 6.4 percent this fiscal year, primarily due to weak performance in manufacturing and subdued investments.
Historically, the difference between the estimates of the Reserve Bank and the NSO has typically ranged between 20 and 30 basis points. Therefore, the 6.4 percent estimate for this fiscal year is in line with expectations and considered reasonable, according to SBI Research on Wednesday.
"But we believe that GDP growth for FY25 could be around 6.3 percent, with more downward bias," said Soumya Kanti Ghosh, chief economic adviser to SBI.
“The overall picture is that demand remains weak and sequential slowdown at 6.4 percent is an outer limit while the actual growth is definitely below the estimated figure,” he said.
Nominal GDP is expected to increase significantly in the current fiscal, by Rs 35,000 more than 2022-23, despite a slowdown in real growth and nominal growth remaining almost stagnant, he added.
The heads that have positively contributed include government consumption with a growth of 8.5 percent in nominal terms and 4.1 percent in real terms. Exports have also held the fort with 8 percent and 5.9 percent in real terms.
But the worrying aspects are of slowing demand, a marked slowdown in gross capital formation, Ghosh said, adding nominal growth in capital formation has declined by 270 bps to 7.2 percent.