GDP growth slows to 5.4%, lowest in seven quarters
India’s Gross Domestic Product (GDP) slowed to 5.4 per cent in the second quarter (July-September) of 2024-25, the third consecutive quarter of slower growth.
As per government data released on Friday, this is the lowest growth rate in seven quarters. The last time the economy fell below this was in the third quarter of fiscal 2023.
The economy had clocked 6.7 per cent growth in the quarter ending June 2024 and 7.8 per cent in quarter ending March 2024, as per the data.
According to experts, the sluggish growth could largely be attributed to weak consumption. Palka Arora Chopra, Director of Master Capital Services Ltd, said, “The reasons for the moderation are a combination of external shocks and internal economic challenges. Urban consumption, which is one of the highest contributors to the GDP, remains subdued, majorly due to the interplay of high borrowing costs and modest earnings growth, despite growth in rural demand. The elevated food inflation repeatedly above the RBI target is impacting household costs and corporate earnings. Weak corporate results for the latest quarter are also signalling slowdown in expenditure. Other factors like slowdown in global economies, geopolitical uncertainties and slow recovery in key markets are also significant contributors to GDP growth.”
During July-September, agricultural output improved, growing 3.5 per cent year-on-year (Y-o-Y) compared to 2 per cent in the previous quarter. However, growth in manufacturing slowed to 2.2 per cent, significantly below the 7 per cent recorded in Q1 and 14.3 per cent a year earlier. Also, the mining sector contracted by 0.1 per cent, reversing robust growth of 11.1 per cent Y-o-Y and 7.2 per cent sequentially.
On outlook for the current fiscal, Sujan Hajra, chief economist and executive director, Anand Rathi Shares and Stock Brokers, said, “We believe that growth in the second half (H2) will be driven by continued strength in agriculture, which is expected to boost rural demand further and increase in capital expenditure (capex) from both central and state governments. Additionally, moderation in the industrial sector’s base should support stronger growth, especially with the complete monsoon season. However, certain headwinds could impact our outlook. Risks include the potential impact of Chinese imports (“China dumping”) and policy uncertainties following the US elections, both of which could dampen a revival in private sector investment.”
Challenges notwithstanding, the RBI has maintained its GDP growth forecast for FY25 at 7.2 per cent, a drop from the previous fiscal year’s 8.2 per cent.
