ICRA sees 6.4% growth in Q3; Bank of Baroda forecasts 6.6%

New Delhi: The Indian economy likely grew by 6.4% in the third quarter of the current fiscal, driven by government spending, rating agency ICRA said on Tuesday. Bank of Baroda has projected a growth rate of 6.6%.These projections come ahead of government data on gross domestic product (GDP) estimates for the third quarter of FY25, scheduled to be released next week. In the third quarter of the previous fiscal, the economy had expanded by 8.6%. “India’s economic performance in the third quarter benefitted from a sharp ramp-up in aggregate government spending (Centre plus state) on capital and revenue expenditure, high growth in services exports, a turnaround in merchandise exports, and healthy output of major kharif crops etc., which would have buffered rural sentiment,” said Aditi Nayar, chief economist at ICRA.

In the second quarter of the current fiscal, India’s GDP growth had slowed to 5.4%–a seven-quarter low.

ICRA said it expects 6.6% growth in gross value added (GVA) while Bank of Baroda has projected 6.2% growth.

“The economy is expected to grow at a slower pace in the third quarter, given subdued growth in the manufacturing sector, partly attributable to base effect,” said Jahnavi Prabhakar, economist at Bank of Baroda.

She, however, pointed out that revival in consumption and an uptick in government spending bodes well for overall growth in Q4 of FY25.For the manufacturing sector, Bank of Baroda has forecast 6% growth in the third quarter, largely because of the higher base effect and slower growth. On the other hand, ICRA has projected 5% growth.The manufacturing sector had expanded by 2.2% in the second quarter of the current fiscal and 11.5% in the third quarter of FY24. Industrial activity in India grew by an average of 3.9% in the third quarter compared with 2.6% in the quarter before. In the third quarter of FY24, the average growth was 6.3%.

Nayar also said that consumer-focused sectors saw a pick-up during the festive season, even as urban consumer sentiment dipped slightly, while sectors like mining and electricity saw an improvement after weather-related challenges in the previous quarter.