Manufacturing GVA down, agricultural growth likely to improve

Business Business: According to the latest report by SBI Ecowrap, India’s GDP growth rate in Q1 FY25 will be in the range of 7.0-7.1 per cent, with a declining trend. However, manufacturing gross value added (GVA) will remain below 7.0 per cent and may come in the range of 6.7-6.8 per cent. The report said that the global economic growth scenario remains uncertain, but softening inflation has created space for monetary policy easing. Employee costs in the manufacturing sector have increased marginally, but debt servicing capacity measured in terms of interest coverage ratio remained stable. Against this backdrop, profit margins have declined, and this will dampen manufacturing growth, the report said. It added that the Indian economy remains resilient despite challenges posed by rising global freight and container costs and supply chain pressures due to semiconductor shortages.

Earlier this month, the RBI Monetary Policy Committee (MPC) had projected real GDP growth at 7.2 per cent for 2024-25. In the first MPC announcements after the Lok Sabha Elections 2024 in June, the central bank had projected real GDP at 7.2 per cent for 2024-25. The RBI has projected real GDP for 2024-25 at 7.1 per cent in Q1, 7.2 per cent in Q2, 7.3 per cent in Q3 and 7.2 per cent in Q4. This is little changed from the previous estimates of 7.3 per cent, 7.2 per cent, 7.3 per cent and 7.2 per cent for the four consecutive quarters of this year. Decline in manufacturing GVA The decline in manufacturing gross value added is attributed to indicators of corporate performance in Q1 of FY 2024-25, which point to a moderation in sales growth of manufacturing companies in both nominal and real terms. As per the report, around 4000 listed entities reported topline and bottomline growth of around 9 per cent in Q1FY25 as compared to Q1FY24. However, ex-BFSI, corporates reported only 5 per cent growth in topline with a -1 per cent decline in EBIDTA in Q1FY25 as against a 23 per cent growth in Q1FY24. Following this, corporate GVA grew by around 10.9 per cent in Q1FY25 as against a 17 per cent growth in Q4FY24 and 26 per cent growth in Q3FY24. During Q1FY25, overall EBIDTA margin for corporates also declined by around 100 bps over Q1FY25, the Ecowrap report said.