India’s Key Sectors Lose Momentum in 2025 Despite RBI Rate Cuts: Growth Slows to Pre-Covid Levels

Key Points

• Growth in India’s major economic sectors has decelerated sharply in 2025 slipping from robust double digits to single-digit rates, matching pre-pandemic levels.
• Bank loan growth has dropped from 16% to just 9% year-on-year as of June 2025, despite the RBI’s policy easing.
• GST collection growth slows to 6.2% for June 2025, compared to 11% a year ago.
• Export growth remains tepid at 6%, while passenger vehicle sales and real estate sector growth have both seen steep slowdowns.
• Corporate wage growth and profits are moderating, with BSE 500 companies now expanding at much lower rates than last year.
• Analysts flag that India’s key macro growth indicators have broadly returned to the more subdued pace seen in 2018-19.

New Delhi: The latest financial review by Nuvama Wealth reveals that India’s much-anticipated economic surge, spurred by the Reserve Bank of India’s (RBI) repo rate cuts and liquidity infusions, is struggling to keep pace, with key indicators slipping back to single-digit, pre-pandemic growth.

Banking Sector: Credit Growth at Multi-Year Low

• India’s annual bank loan growth has plummeted to just 9% as of June 2025, compared to 16% a year ago, according to data from the RBI. This marks a major contraction in new lending activities and signals weaker demand from both businesses and consumers amid prevailing global and domestic headwinds.

GST Collections: Fading Tax Momentum

• GST revenue growth reached only 6.2% year-on-year in June 2025, with total collections at ₹1.85 lakh crore, a notable dip from the 11% pace seen in June 2024. Several states are even observing negative growth or stagnation, and June marked a sequential decline after strong April and May figures.

Exports & Consumption: Tepid Recovery

• Total exports (goods and services) have increased by just 5–6% in 2025, far below the double-digit boom observed during FY23. The global slowdown, trade volatility, and softer domestic consumption are driving this moderation.
• Passenger vehicle sales dropped by 6.3% y/y in June 2025, showing muted consumer demand across the auto sector—down from a healthy 7% growth rate a year earlier.

Real Estate: Property Market Cools

• Property sales and values in India’s top cities have slowed drastically to just 4% growth, a sharp fall from the 28% spurt witnessed last year. Recent RBI rate cuts and infrastructure investments are helping stabilize the sector, but overall growth is constrained by cautious buyer sentiment and tighter borrowing norms.

Corporate Earnings & Eight Core Sectors

• Wage growth among BSE 500 companies is down to 6% from 12% last year, reflecting tighter corporate margin environments.
• Profit growth rate (excluding oil marketing companies) has halved to 10% from 21%, though experts still expect double-digit earnings in coming years if macro stability persists.
• Core sector (eight key industries) growth stands at just 3% in June 2025 versus 8% a year ago further underscoring the slowdown in industrial expansion.

Table: Key Economic Indicators India, June 2024 vs. June 2025

Outlook: Slower Growth, Policy Uncertainty

While India is widely projected to remain a global growth leader in the medium term, recent figures underscore a return to more cautious, pre-pandemic levels of expansion. Ongoing global trade volatility, high-base effects, and weak private credit demand are cited as primary reasons for this deceleration. Policy makers are expected to monitor developments closely as they consider further measures to reignite demand and sustain momentum.