Domestic demand picks up, however

Key takeaways from the first-quarter GDP data

• Gross domestic product (GDP) growth slowed in line with expectations: GDP grew 6.7% on-year in the first quarter of fiscal 2025, in line with our forecast of 6.8%. The print was a deceleration vs the fourth quarter of fiscal 2024, which saw the economy expand 7.8%. And in the first quarter of fiscal 2024, the economy had grown 8.2%
• Nominal GDP moderated as well to 9.7% from 9.9% in the last quarter of fiscal 2024 but was higher than 8.5% in the year-ago quarter

Within the GDP basket:

• Decline in government consumption spending was a drag on GDP growth. And reducing growth in net taxes limited the rise in GDP over gross value added (GVA) growth
• Also, despite healthy growth of 7%, manufacturing was slower than in the last quarter fiscal 2024, while agriculture and services improved. However, the improvement in agriculture was relatively modest, which capped the rise in GDP

That said:

• Non-agriculture growth was stronger: Non-agriculture growth rose to 7.6% from 7.3% in the fourth quarter of last fiscal. Within the space, construction rose the sharpest, overtaking government capital expenditure (capex). This suggests continued momentum in private investment, particularly household real estate activity
• Consumption and investment pick up: After a weak fiscal 2024, private consumption picked up significantly in the first quarter of this fiscal. A large part of the increase in consumer demand was owing to improving rural conditions. Also, growth in fixed investments accelerated despite low government capex, indicating other private investments (i.e. household and private corporate investments) have gathered steam