Aditi Nayar

Economy
Chief Economist, Head-Research & Outreach, ICRA

FY2025 GDP growth unlikely to cross 6.5%

India’s initial Q2 FY2025 GDP and GVA numbers were quite disappointing, with the year-on-year (YoY) growth printing at a seven-quarter low each of 5.4% and 5.6%, respectively. This was well below our estimate of 6.5-6.6%. The negative surprise was largely on account of the industrial segment, which witnessed a significantly sharper-than-expected slowdown. On one hand, excess rains in August-September 2024 temporarily weighed down on mining output and electricity demand. Further, an adverse base and weak demand impacted manufacturing GVA growth in the quarter. Additionally, services GVA growth dipped, while continuing to exceed the 7.0% mark. In contrast, agricultural GVA growth recorded an expected uptick to a five-quarter high of 3.5% in Q2 FY2025 from 2.0% in Q1 FY2025. On the expenditure side, private consumption growth slowed to 6.0% in Q2 FY2025 from 7.4% in Q1 FY2025, despite a low base. We remain circumspect about the Q1 print and believe that it may be revised downwards when the Q3 FY2025 data is released in February 2025. Additionally, investment activity curiously slowed down to 5.4% in Q2 FY2025 from 7.5% in Q1 FY2025, despite the turnaround in Government capex. Looking ahead, we believe that growth likely bottomed out in Q2 FY2025, and the trajectory is set to improve in the next two quarters, aided by an uptick in Government capex, rural demand, and the dissipation of the transient impact of heavy rains.

Kinjal Shah

Corporate Sector
Senior Vice President & Co-Group Head – Corporate Ratings

Operating profit margin (OPM) for India Inc is expected to improve in H2 FY2025

ICRA expects sequential revenue growth for India Inc. in Q3 FY2025, led by improved rural demand and uptick in Government spending, additionally supported by the festive season. However, headwinds such as uneven urban demand and evolving global uncertainties could weigh on growth in H2 FY2025. On balance, ICRA expects the operating profit margin (OPM) for India Inc to improve in the coming quarters. As a result, the credit metrics of India Inc. in Q3 FY2025 are estimated to improve with the interest coverage ratio in the range of 4.5-5.0 times, against 4.1 times in Q2 FY2025. ICRA’s analysis of the Q2 FY2025 performance of 590 listed companies (excluding financial sector entities) revealed a 6% YoY revenue growth for Corporate India and a moderation in OPM, by 102 bps to 16.9%. Despite the YoY growth in revenues, higher input cost with weak urban demand, adversely impacted the margins. On a sequential basis, the OPM declined by around 81 bps in Q2 FY2025. While the input costs have softened in recent months, they remained higher compared to the historic levels, and accordingly, India Inc.’s OPM is yet to revive to its historic highs (19% seen in FY2022).

Girishkumar Kadam

Renewable Energy
Senior Vice President & Group Head - Corporate Ratings

Indian Renewable Energy capacity is expected to reach 250 GW by Mar’26, led by large project pipeline

ICRA expects the installed renewable energy capacity (including large hydro) in India to increase to about 250 GW by March 2026 from the level of 201 GW as of September 2024. The capacity addition will be driven by the large project pipeline of over 80 GW, following the significant improvement in tendering activity in FY2024. Moreover, the tendering activity remained high in the current fiscal, in line with the 50 GW annual bidding trajectory announced by the Government of India in March 2023. The healthy renewable project pipeline and the favourable solar PV cell and module prices are expected to improve the RE capacity addition to over 26 GW in FY2025 from 19 GW in FY2024. This will further scale up to 32 GW in FY2026, mainly driven by the solar power segment, and given the impending expiry of the waiver on inter-state transmission system (ISTS) charges in June 2025. Apart from the utility segment, ICRA expects the rooftop solar segment and the commercial & industrial (C&I) segments to contribute significantly to the capacity addition. Nevertheless, challenges remain on the execution front with respect to delays in land acquisition and transmission connectivity, which, if sustained, could hamper the sector’s prospects.

Abhishek Dafria

Structured Finance
Senior Vice President and Group Head, Structured Finance Ratings

Creditor realisation crosses Rs. 3.5 lakh crore through successful resolutions under IBC; haircuts, however, continue to rise

Rating agency ICRA noted that in Q2 FY2025, the number of corporate debtors admitted by the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code (IBC) declined to a low of 189 cases i.e. a moderation of 23% and 16% on a QoQ and YoY basis, respectively. However, the number of corporate insolvency resolution processes (CIRPs) closed during the quarter increased to 199, i.e. higher by 3% and 29% on a QoQ and YoY basis, respectively, which is an encouraging sign. The number of overall admitted corporate debtors since the introduction of IBC in 2016 has now crossed the 8,000 mark, of which 6,039 CIRPs have been resolved (either through a successful resolution plan or withdrawal or liquidation) by end-September 2024. A total of 1,068 CIRPs have seen successful closure through a resolution plan, thereby allowing the corporate debtor to continue as a going concern. The total amounts realised by the financial creditors in these cases crossed Rs. 3.5 lakh crore in September 2024, though the amount as a percentage of admitted claims continued to be low at ~31%.