Decoding GDP Numbers: India’ Resilient Growth

India’s GDP growth for the first quarter of FY25 came in at 6.7%, slightly below the Reserve Bank of India’s (RBI) projection of 7.1% and lower than the 7.8% recorded in the previous quarter (Q4 FY24) and 8.2% in Q1 FY24. Despite this slowdown, India remains one of the fastest-growing large economies globally, demonstrating resilience amid challenging global conditions.

Key Highlights of Q1 FY25 GDP Growth

Indicator	Q1 FY25	Q4 FY24	Q1 FY24
GDP Growth Rate	6.7%	7.8%	8.2%
Private Final Consumption Expenditure (PFCE) Growth	7.4%	4.0%	5.5%
Gross Fixed Capital Formation (GFCF) Growth	7.5%	6.5%	8.5%
Export Growth	8.7%	8.1%	-6.6%
Import Growth	4.4%	8.3%	15.2%
Government Final Consumption Expenditure (GFCE) Growth	-2.0%	0.9%	-0.1%

1. Private Consumption Recovery:
   • Private consumption saw a significant recovery, growing at 7.4% in Q1 FY25 compared to 5.5% in Q1 FY24. This turnaround is largely due to a revival in rural consumption, supported by steady urban demand.
2. Investment Activity:
   • Gross fixed capital formation (GFCF) showed robust growth of 7.5% in Q1 FY25, reflecting strong investment activity. This growth was driven by government infrastructure spending and healthy private sector capex.

Sector	Q1 FY25 Growth	Q4 FY24 Growth	Q1 FY24 Growth
Manufacturing	7.4%	8.3%	5.0%
Construction	10.5%	8.6%	8.6%
Financial & Business Services	7.1%	7.6%	12.6%
Trade, Transport, Hospitality	5.7%	6.7%	10.7%
Agriculture	2.0%	3.0%	2.7%

3. Industrial Growth:
   • The industrial sector posted an 8.2% growth in Q1 FY25, with broad-based contributions across mining, manufacturing, electricity, and construction. This balanced growth indicates that industrial recovery is becoming more evenly distributed.
4. Export and Import Dynamics:
   • Exports grew by 8.7% in Q1 FY25, while imports increased by 4.4%. The positive contribution of net exports to GDP growth highlights India’s resilience in a challenging global trade environment.
5. Government Spending:
   • Government consumption expenditure declined by 2% in Q1 FY25, reflecting a focus on capital expenditure rather than revenue spending. This trend is expected to continue as the government prioritizes long-term growth through infrastructure investment.

Key Takeaways for Investors

1. Focus on Consumption-Driven Sectors:
   • The recovery in private consumption, especially in rural areas, signals opportunities in sectors like consumer goods, retail, and FMCG. Companies with strong rural market penetration are likely to benefit.
2. Infrastructure and Real Estate:
   • The continued momentum in gross fixed capital formation suggests a favorable outlook for infrastructure and real estate sectors. Investors may consider increasing exposure to companies involved in these areas, as they are poised to benefit from ongoing government and private sector investments.
3. Manufacturing and Industrial Growth:
   • Broad-based industrial growth indicates strength in the manufacturing, mining, and construction sectors. Companies in these industries are likely to see sustained growth, making them attractive investment opportunities.
4. Caution in Export-Dependent Sectors:
   • Although net exports contributed positively to GDP growth, the uncertain global trade environment calls for caution. Investors should closely monitor international developments and consider hedging strategies to manage risks in export-driven sectors.
5. Inflation Concerns:
   • The RBI expects inflation to rise in Q3 FY25, driven by food prices. This could impact sectors sensitive to raw material costs, such as FMCG and consumer goods. Investors should be vigilant and consider diversifying to mitigate potential risks.

Conclusion

India’s Q1 FY25 GDP growth, while slightly below expectations, underscores the economy’s resilience and potential for recovery. Positive trends in private consumption, investment activity, and industrial growth provide a strong foundation for the rest of the fiscal year. However, challenges such as inflation, global trade uncertainties, and the need for continued government spending will require a strategic and cautious approach from investors. By diversifying investments across sectors poised for growth and monitoring key economic indicators, investors can navigate the economic landscape effectively in the coming months.

Market this week

	26th August 2024 (Open)	30th August 2024 (Close)	%Change
Nifty 50	₹ 24,906	₹ 25,236	1.3%
Sensex	₹ 81,388	₹ 82,366	1.2%

• The broader indices reached new record highs in the week ending August 30 but underperformed compared to the main indices, which also surged to fresh all-time highs.
• The rally was driven by positive global sentiment following the latest Jackson Hole meeting, where the outcome hinted at a potential rate cut by the Federal Reserve in the upcoming September meeting.
• The BSE Midcap index gained 1.5%, the BSE Largecap index added 1.3%, and the BSE Smallcap index rose by 0.6% during the week.
• Foreign Institutional Investors (FIIs) sold equities worth Rs 19,139.76 crore, while Domestic Institutional Investors (DIIs) bought equities worth Rs 20,871.10 crore.

Weekly Leaderboard

NSE Top Gainers			NSE Top Losers
Stock		Change (%)	Stock		Change (%)
LTI Mindtree	▲	9.1 %	Coal India	▼	(2.6) %
Bajaj Finserv	▲	8.7 %	Kotak Mahindra	▼	(2.1) %
Bajaj Finance	▲	6.9 %	Adani Enterprises	▼	(1.9) %
HCL Technologies	▲	5.5 %	Grasim Industries	▼	(1.8) %
Bharti Airtel	▲	5.5 %	HUL	▼	(1.3) %

Stocks that made the news this week:

• One 97 Communications, the parent company of Paytm, surged over 12% on August 30, surpassing the Rs 600 level for the second consecutive day. The rally followed the government’s approval for downstream investment in Paytm Payments Services. This comes after the Reserve Bank of India (RBI) had rejected Paytm’s PA license permit application in November 2022, instructing the company to reapply with compliance under Press Note 3 foreign direct investment norms.

• Mahindra & Mahindra Ltd’s share price rose over 2% on August 30 after announcing a partnership with Sentrycs to develop anti-drone technology aimed at protecting India’s critical infrastructure, airports, and borders. Sentrycs specializes in adaptive counter-drone solutions using innovative cyber over RF technology. The collaboration will focus on the Transfer of Technology (TOT) and the manufacturing of RF-based counter-drone solutions under the Government of India’s ‘Make in India’ initiative.

• Bharti Airtel shares surged nearly 3% to a record high of Rs 1,608.40 on August 30, as the Supreme Court reviewed curative petitions filed by Bharti Airtel and Vodafone Idea in the Adjusted Gross Revenue (AGR) case. Brokerages, including Bernstein, believe the review could lead to government relief measures for telecom companies.