India Inc is expected to witness a robust 7-8% revenue growth in the fourth quarter of the current fiscal (Q4 FY25), propelled by a resurgence in rural demand and an increase in government spending, according to a report released on Monday.
The report by ICRA highlighted that the recovery in operating profit margins (OPM), observed over the past quarter, is likely to remain steady at 18.2-18.4%. This improvement is driven by enhanced consumer sentiment, leading to a boost in demand.
Despite these positive indicators, the report also pointed out potential challenges, including uncertainties in global trade policies, particularly regarding trade tariffs, which could impact overall growth levels.
Additionally, India Inc is expected to benefit from lower interest costs following the recent repo rate cut by the Reserve Bank of India (RBI). This reduction will lead to a slight expansion in the interest coverage ratio, projected to rise to 4.6-4.7 times in Q4 FY25, compared to 4.5 times in Q3 FY25.
Kinjal Shah, Senior Vice President and Co-Group Head – Corporate Ratings at ICRA Limited, noted that rural demand is anticipated to remain strong in the first half of calendar year 2025, supported by robust kharif crop output and a favorable outlook for the ongoing rabi season. However, he emphasized that a normal and well-distributed monsoon in 2025 will be crucial for sustaining agricultural growth.
Urban demand, which has remained sluggish over recent quarters, is also expected to see an uptick. This improvement will be fueled by factors such as significant income-tax relief announced in the Union Budget 2025, monetary easing by the RBI, and expectations of moderating food inflation, all of which will enhance discretionary consumer spending.
The report also highlighted key factors that will require close monitoring in the near term, including developments in the global economic and political landscape, foreign exchange rate movements, potential policy changes under the new US President Donald Trump, government spending trends, and the revival of domestic urban demand.
Certain high-growth industries, such as electronics, semiconductors, and specialized automotive segments like electric vehicles, are expected to continue attracting investments. These sectors will benefit from the government’s production-linked incentive (PLI) schemes, which aim to drive manufacturing expansion and technological advancements.
As India Inc navigates both opportunities and challenges in the coming months, the interplay of domestic policy measures, global economic trends, and consumer sentiment will play a crucial role in shaping growth trajectories across various sectors.
