He noted that high-frequency demand indicators such as two-wheeler sales and fast-moving consumer goods (FMCG) volumes in rural areas have been gaining momentum since the March quarter and have remained strong in June.
Farm incomes are likely to be supported by better weather conditions and higher crop sowing this year compared to last year. There is also support from moderation in inflation on a year-on-year basis. “…FY25 (2024-25) is likely to be around 4.5% (inflation) as against around 5.5% last year. So, purchasing power is also supported by that trend,” it said.
Private consumption also surprised positively in the June quarter, reaching 7.4%, its highest level in seven quarters.
Morgan Stanley has raised its forecast for India’s gross domestic product (GDP) by 20 basis points to 7% for FY25 on improved consumption and a strong capital spending cycle.
Chachra said that “the quarter ended June has been a little better, especially if you look at the gross value added (GVA) or the supply side of the growth data points.”
According to Chachra, there is now greater confidence that agricultural growth will improve compared to the previous year.
The GDP projection for FY26 remains unchanged at 6.5%.
India’s economic activity slowed Minimum 15 months of 6.7% in the first quarter of 2024-25 due to poor performance of the agricultural sector, according to data from the National Statistics Office (NSO) released on Friday (Aug 30).
Meanwhile, Nomura cuts its FY25 economic growth forecast for India to 6.7% year-on-year from 6.9% after official data on Friday showed the country’s GDP grew more slowly than expected on an annual basis in the April-June quarter.
Chachra expects India’s medium-term growth to stabilise within the more sustainable range of 6.5-7%.
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