Barclays projects 7.2% growth in Q4 for India amid tax surge and improvement in agriculture sector
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The Indian economy is projected to expand by 7.2% in the fourth quarter of FY25, due to a sharp increase in net indirect tax growth and improvement in the agriculture sector, according to Barclays.The agriculture sector is expected to show improvement in Q4, with the gross value added (GVA) rising to 5.8% compared to 5.6% in Q3, it noted. The net indirect taxes grew by 30% year-on-year in the January-March quarter.However, the industrial sector faced a slowdown in Q4, which trimmed 9 basis points off from headline gross domestic product (GDP), said Barclays.The GDP grew by 6.2% in the third quarter.'With monetary easing commencing only in February and transmission still working its way through the real economy amid flush liquidity conditions, we expect a lower cost of capital to finally aid industrial growth going ahead,' said Aastha Gudwani, India chief economist, Barclays.The National Statistical Office (NSO) will release the GDP figures for Q4FY25 on May 30.In a separate note, Nomura projected GDP growth of 6.7% in Q4, citing moderation in private consumption, fixed investment and exports.'But a sharper contraction in import growth should mean a positive contribution from net exports to overall GDP growth,' it added.In April, the US imposed a 26% duty on Indian goods, which was subsequently paused for 90 days until July 9. However, the baseline tariff of 10% remains in effect.'The 90-day tariff reprieve offered by President Donald Trump is expected to provide some stability to export-oriented sectors,' said Gudwani.NSO will also release provisional estimates for FY25 on May 30.Barclays and Nomura forecast a GDP growth of 6.4% and 6.2%, respectively, for FY25 -- lower than the government's estimate of 6.5% and the Reserve Bank of India's (RBI) 6.6%.Morgan Stanely on Wednesday said that domestic demand will support the economy in FY26, amidst uncertainty from external factors, projecting a growth of 6.2%.'Within domestic demand, we expect consumption recovery to become more broad-based with urban demand improving and rural consumption levels already robust,' it said.Barclays pegs GDP growth at 6.5%, while Nomura is more cautious, projecting 5.8% growth, citing sluggish urban consumption, moderating credit growth, and global slowdown due to tariffs.Easing inflation is expected to provide support to the economy in the current fiscal year. The average inflation rate was 4.6% in FY25.Morgan Stanley anticipates benign inflation due to lower food prices, likely to prompt the RBI to cut interest rates. Both Morgan Stanley and Nomura expect a 100 basis point rate cut this year. The monetary policy committee of the RBI had cut the policy rates by 25 basis points each in February and April, bringing the rate down to 6%.
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