As the world grapples with heightened uncertainties ahead of US President-elect Donald Trump’s inauguration, India remains in a robust economic position. High-frequency indicators signal a steady pick-up in growth during the third quarter of the fiscal year 2024-25 (Q3 FY25), according to a Bank of Baroda (BoB) report.
Key economic markers, including GST collections, services PMI, air passenger growth, and vehicle registrations, demonstrated notable improvement in Q3 compared to Q2.
Key Highlights:
- GST Collections:
- GST collections rose by 8.3% year-on-year (YoY) in Q3 FY25 to ₹5.5 lakh crore, up from ₹5.3 lakh crore in Q2.
- This indicates stronger consumption patterns, boosted by festive demand.
- Air Passenger Growth:
- Air traffic registered an 11.6% growth in Q3, compared to 7.8% in Q2, reflecting increased urban consumption.
- Services PMI:
- The services PMI averaged 59.2 in Q3, improving from 58.1 in the same period last year.
- Corporate Sector Performance:
- Quarterly corporate results for Q3 FY25 are expected to reflect improved performance, aided by festive demand and economic recovery.
Macroeconomic Stability:
- Current Account Deficit (CAD):
- The CAD narrowed to 1.2% of GDP in Q2 FY25, down from 1.3% in Q2 FY24. This improvement was supported by robust services exports and remittance inflows.
- Stock Market Performance:
- The Sensex and Nifty 50 recorded significant gains in CY24, rising 8.7% and 9%, respectively. Sensex reached an all-time high, surpassing 85,500.
- Sectors like real estate, consumer durables, and IT emerged as top performers.
- Indian Rupee and Bonds:
- The rupee depreciated by 2.8% in 2024 but outperformed many peer currencies.
- Bond yields remained stable, buoyed by India’s inclusion in global indices like JP Morgan’s Emerging Market Index.
Outlook for H2 FY25:
- The BoB report anticipates recovery in economic growth during the second half of FY25, supported by government spending and improved private investments.
- Inflation is expected to moderate, creating room for potential rate cuts by the Reserve Bank of India (RBI). A 25 bps rate cut is projected in February 2025, with a cumulative easing of 50-75 bps in the current cycle.
- Industrial production (IIP) growth is likely to accelerate in H2 FY25, benefiting from stronger investment flows.
Global Comparison:
While India shows strong economic momentum, other major economies face mixed signals:
- China: Struggles with slow manufacturing growth and challenges in boosting domestic consumption and real estate recovery.
- US: Mixed performance with a softening labor market and weak manufacturing but resilient retail sales and service sectors.
- Europe: Manufacturing lags, while the service sector gradually recovers.
India’s economic resilience and policy measures place it in a favorable position to navigate global uncertainties, setting a promising tone for 2025.
