Aditi Nayar

Economy
Chief Economist, Head-Research & Outreach, ICRA

GDP growth eased in Q1 FY2025 while GVA accelerated

India’s gross domestic product (GDP) growth expectedly slowed down to a five-quarter low of 6.7% in Q1 FY2025 from 7.8% in Q4 FY2024, even as the gross value added (GVA) growth surprisingly accelerated between these quarters (to 6.8% from 6.3%). This divergent trend was led by the normalisation of the growth in net indirect taxes and hence, the slowdown in the GDP growth is not a cause for alarm, in our view. The higher-than-expected growth in the GVA in Q1 FY2025, as well as the acceleration in the same vis-à-vis Q4 FY2024 was largely led by construction, public administration, defence and other services (PADOS), and the agriculture segments. The pick-up in the construction GVA growth, to 11.6% in Q1 FY2025 from 8.5% in Q4 FY2024, was particularly surprising, given that the volume growth in construction-related indicators such as cement and steel output, had slowed between these quarters. Besides, the capex of the Centre and the states had also contracted quite sharply in Q1 FY2025.

Sachin Sachdeva

Banking Sector
Vice President & Sector Head – Financial Sector Ratings, ICRA

Infrastructure bond issuances by public sector banks to drive banks’ bond issuances to an all-time high in FY2025

In its recent report, ICRA highlighted that with deposit growth lagging credit growth, banks have increased fund-raising via bonds, even as the share of borrowings in total liabilities remains below the pre-Covid levels. ICRA expects the banks’ bond issuances to reach an all-time high of Rs. 1.2-1.3 trillion in FY2025, surpassing the earlier high of Rs. 1.1 trillion in FY2023 (Rs. 1.0 trillion in FY2024). Tight liquidity conditions and credit growth continuously surpassing deposit growth has necessitated fund raising by banks from alternate sources. For FY2025 (YTD), banks’ total bond issuances were Rs. 767 billion, registering a YoY growth of 225% and reached 75% of the total issuances done in FY2024. With private banks focusing on reducing their credit-to-deposit ratio, the fund-raising through bonds is largely being dominated by public banks this year. Additionally, continued focus of the Government of India (GoI) towards infrastructural spending, the availability of sizeable infrastructure loan book, which is eligible to be funded through these infrastructure bonds and strong demand from insurance companies and provident funds for long term issuances, support these bond issuances. While these are required to have a minimum tenor of 7 years as per regulations, however, given the investor preference, they have been issued for relatively longer tenors of even 10 and 15 years.

Vinay Kumar G

Roads & Highways Sector
Vice President and Sector Head - Corporate Ratings, ICRA

Project awarding activity on slow lane; competition to remain elevated

ICRA has revised its forecast of road awards by the Ministry of Road Transport and Highways (MoRTH) in FY2025 to 8,500-9,000 km, similar to last year’s awarding of 8,581 km (from its earlier estimate of 10,000-10,500 km). The awards declined by 31% to 8,551 km in FY2024 from 12,375 km in FY2023 amid a delay in pending Cabinet approval for the revised cost of Bharatmala Pariyojana (BMP) and restrictions on project awards imposed by the Model Code of Conduct, ahead of the General Elections. In 4M FY2025, the road awards stood at 563 km, 50% lower than the 1125 km awarded in 4M FY2024. Recently, the Ministry clarified that no new additional projects would be awarded under the BMP, and in addition, future awards would be based on a corridor-based highway development, unlike the earlier scheme-based development.

Kinjal Shah

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

Revenues of Indian pharma companies likely to expand by 9-11% in FY2025

ICRA expects the revenues of its sample set of companies to expand by a healthy 9-11% in FY2025, albeit a moderation from the YoY increase of 13-14% recorded in FY2024. This will be driven by 9-11% revenue growth from the US market, 7-9% each from the European and domestic markets, and 11-13% from the emerging markets. ICRA’s Stable outlook on the industry reflects the steady growth expectations across key markets and the healthy credit profile of pharma players.