Domestic rating agency Icra on Wednesday said India's real GDP growth for the September quarter is likely to decline to 6.5 per cent due to heavy rains and weaker corporate performance.

The agency, however, maintained its FY25 growth estimate at 7 per cent on expectations of a pick up in economic activity in the second half of the fiscal.

The estimates and commentary on the outlook come at a time when there are concerns around the growth slowdown on a slew of factors like slowing down urban demand.

The RBI is sticking to its estimate of 7.2 per cent growth for the fiscal, but a majority of watchers expect it to be under the 7 per cent figure and many have been revising down in the last few weeks.

Official data for the Q2 economic activity is expected to be published on November 30. In Q1, the GDP expansion had come at 6.7 per cent.

Icra said the dip in Q2 will be due to factors like heavy rains and weak corporate margins.

"While government spending and kharif sowing have shown positive trends, the industrial sector, particularly mining and electricity, is expected to slow down," it said.

The services sector is projected to improve, and a back-ended recovery is anticipated, leading to a full-year GDP growth of 7 per cent, it added.

"Q2 FY2025 saw tailwinds in terms of a pick-up in capex after the Parliamentary Elections as well as healthy expansion in sowing of major kharif crops. Several sectors faced headwinds on account of heavy rainfall, which affected mining activity, electricity demand and retail footfalls, and a contraction in merchandise exports," its chief economist Aditi Nayar said.

She said benefits of the healthy monsoons lie ahead, with upbeat kharif output and replenished reservoirs likely to lead to a sustained improvement in rural sentiment.

There is considerable headroom for the GoI's capital expenditure, which needs to expand by 52 per cent in Y-o-Y terms in H2 FY2025 to meet the budget estimate for the full year, Nayar added.

"We are watchful of the impact of a slowdown in personal loan growth on private consumption as well as geopolitical developments on commodity prices and external demand," the chief economist said.

In Q2, investment activity improved over Q1, while remaining sluggish amid slow execution of infra projects owing to surplus monsoon rains, the agency said, adding that new project announcements witnessed a healthy rebound to Rs 6.7 lakh crore in Q2.

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