State Bank of India's recent study estimates that Q2FY25 GDP growth is at ~6.5% and a push is expected in Q3 and Q4 growth numbers, which might lead the overall yearly GDP growth to 7%. Based on the analysis of the 50 leading indicators in both consumption as well as to dip across agriculture, industry and services in Q2. The percentage of indicators showing acceleration in Q2 declined to 69% as opposed to 80% in Q2FY24 and 78% in Q1FY25.

Recent geopolitical tensions have pushed the otherwise buoyant global economy downward. The geopolitical risk indicator showed an upturn in October due to the ongoing conflict in the Middle East region. A war is brewing between Israel and Hezbollah. Given the escalating tension between China and the Philippines in the South China Sea, there is an increased risk of US-China strategic tension.

Capex (capital expenditure) as a percentage of the Budget Estimates is lower in H1FY25 owing to the restriction of the general election, while revex (revenue expenditure) is outpacing capex.  The Capex is likely to pick up in the H2 with increased government spending. The growth in rural demand and consumption and decline in urban demand and consumption are vindicated by the 85% rural indicator accelerating as opposed to 73% urban indicators.

Domestic sales of passenger vehicles and other consumption indicators such as diesel, and electricity consumption have eased, Transport and communication indicators as passenger and freight traffic at airports and toll collection are showing traction, but e-vehicle registration continues to lag. E-way bills, rural agricultural wages, domestic two-wheeler and three-wheeler sales, and domestic tractor sales are showing consistency in growth. IT companies- Wipro, TCS, Infosys, and Cognizant shows positive employee hiring in September.

Rural consumption demand thrives on the back of robust consumer sentiments – which posits that continuous Government efforts are reaching the bottom of the pyramid, thus asserting economic stability. The government should exercise caution while making policy decisions such as loan waivers, MSP MSP-driven agricultural growth.

The latest numbers show that Schedule Commercial Bank deposit growth surpassed credit growth. In the current FY so far (till 18 Oct), All Schedule Commercial Banks deposits grew by 11.7% YoY compared to last year’s growth of 13.4%, while credit grew by 11.5% YoY compared to last year's growth of 20.0%. The deposit Credit differential has now turned positive, which was last seen in April 2022. In terms of profitability, Public Sector Banks have trumped the Private Sector Banks by a wide margin (both QoQ / YoY basis. Expected Q3 and Q4 growth numbers could push overall yearly GDP growth closer to 7% in FY25.