Favourable monsoon, rural demand to aid growth; Q4 GDP pegged at 6.4-6.5%: SBI Research

India's economy is projected to grow at 6.4%-6.5% in the fourth quarter of FY25, driven by resilient fundamentals despite mounting global uncertainties, according to a research report by the State Bank of India (SBI).

The forecast, based on SBI’s proprietary ‘Nowcasting Model’ that tracks 36 high-frequency indicators across industrial, services and global sectors, comes ahead of the National Statistical Office’s (NSO) provisional GDP estimates for FY25.

The report suggests that the overall GDP growth for FY25 could settle at around 6.3% unless there are major revisions to prior quarters (Q1–Q3).

"Despite weathering effects precipitated by global upheavals, the Indian economy stays largely resilient," SBI said in its note.

The report highlighted that while consumer confidence and investment sentiment remain cautious, favourable monsoon predictions could provide a much-needed boost.

The India Meteorological Department (IMD) has forecast an early onset of the southwest monsoon over Kerala, possibly by the end of May, making it the earliest since 2009.

Rainfall during the June–September season is expected to be above normal at 105% of the long-period average.

Neutral El Niño-Southern Oscillation conditions and favourable oceanic parameters are expected to support healthy precipitation, aiding agricultural prospects.

On the back of this, India has set a target of 354.64 million tonnes of foodgrain production for the 2025-26 crop year, up from 341.55 million tonnes targeted in 2024-25.

Meanwhile, the global economic outlook remains subdued. The International Monetary Fund (IMF) has projected global growth to decelerate to 2.8% in 2025 and marginally improve to 3% in 2026, largely due to elevated policy uncertainty and trade tensions.

India's FY25 growth projection has been revised down by 30 basis points due to these global headwinds.

On the corporate front, earnings data for Q4 FY25 indicates a stable performance. Around 1,200 listed firms posted 6% year-on-year revenue growth, while EBITDA and PAT rose by 10% and 14% respectively. Excluding the banking and financial services sector, revenue and PAT of about 1,000 listed companies grew by 4% and 20%, respectively.

However, EBITDA margins saw a sequential decline, dipping 74 basis points to 14.1% in Q4 FY25 from 14.84% in Q3 FY25. Corporate Gross Value Added (GVA) growth moderated to 8.7% year-on-year, suggesting some pressure on profitability.

SBI's analysis also noted that easing household inflation expectations have encouraged higher discretionary spending, which could boost demand-led growth in the coming quarters.

The provisional estimates of annual GDP for FY 2024-25, along with Q4 GDP estimates, will be released on May 30.