India’s GDP Growth Slows to 5.4% in Q2 FY25 Amid Manufacturing and Mining Setbacks
India's GDP Growth Slows to 5.4% in Q2 FY25 Amid Manufacturing and Mining Setbacks
India continues to be the fastest-growing large economy in the world, even though its economic growth has slowed to a near two-year low of 5.4 percent for the July-September quarter of this fiscal year. This decline is attributed to the underperformance of the manufacturing and mining sectors, along with weak consumer spending, as reported on Friday.
In comparison, India’s gross domestic product (GDP) grew by 8.1 percent during the same quarter of the previous fiscal year (2023-24) and by 6.7 percent in the first quarter (April-June 2024). The lowest recorded GDP growth prior to this was 4.3 percent in the third quarter (October-December 2022) of the financial year 2022-23.
According to the data, the growth rate of private final consumption expenditure (PFCE), which reflects consumer spending, slowed to 6 percent in the September quarter, down from 7.4 percent in April-June of this year. Nevertheless, India still holds the title of the fastest-growing major economy, as China’s GDP growth for the July-September quarter was only 4.6 percent.
“According to Chief Economic Advisor V Anantha Nageswaran, the real GDP growth rate of 5.4 percent is disappointing and on the lower side, but he noted that there are some positive aspects to consider, particularly in the agriculture and construction sectors.
Aditi Nayar, Chief Economist and Head of Research & Outreach at ICRA Ltd, commented that the GDP growth has fallen more sharply than anticipated, landing at a modest 5.4 percent for Q2 FY25. She pointed out that several sectors have shown negative surprises, especially the sluggish performance of manufacturing and a slight contraction in mining, along with a slower-than-expected growth in the services sector.
According to data from the National Statistical Office (NSO), the Gross Value Added (GVA) in the agriculture sector improved to 3.5 percent in the latest July-September quarter, compared to 1.7 percent a year earlier. However, GVA in the manufacturing sector decreased to 2.2 percent in the second quarter of the current fiscal year, down from an impressive growth of 14.3 percent during the same period last year. Additionally, the output in the mining and quarrying sector saw a minimal contraction of 0.01 percent in the second quarter, contrasting with a growth of 11.1 percent a year prior.”
The data reveals that the GVA for financial, real estate, and professional services expanded by 6.7 percent, which is a slight increase from 6.2 percent in the same quarter last year. Meanwhile, the sector encompassing electricity, gas, water supply, and other utility services grew by 3.3 percent, a significant decline from the 10.5 percent growth seen a year ago.
In the construction sector, growth was recorded at 7.7 percent in the second quarter, down from 13.6 percent year-on-year. The overall GDP growth for the April-June quarter of 2024-25 remained steady at 6.7 percent. The National Statistical Office (NSO) stated that the real GDP for Q2 of 2024-25 is estimated at Rs 44.10 lakh crore, compared to Rs 41.86 lakh crore in Q2 of 2023-24, reflecting a growth rate of 5.4 percent.
For nominal GDP, which is GDP at current prices, the estimate for Q2 of 2024-25 stands at Rs 76.60 lakh crore, up from Rs 70.90 lakh crore in the same quarter last year, indicating a growth rate of 8.0 percent. On a half-yearly basis, the real GDP for the first half of 2024-25 (April-September FY25) is projected at Rs 87.74 lakh crore, an increase from Rs 82.77 lakh crore in the first half of 2023-24, showing a growth rate of 6 percent.
In the first half of 2024-25, the nominal GDP, which reflects GDP at current prices, is estimated to be Rs 153.91 lakh crore, an increase from Rs 141.40 lakh crore in the same period of 2023-24. This represents a growth rate of 8.9 percent.
Additionally, government data indicates that the Centre’s fiscal deficit reached 46.5 percent of the full-year target by the end of the first seven months of the current financial year. In absolute terms, this fiscal deficit, which is the difference between government expenditure and revenue, amounted to Rs 7,50,824 crore during the April-October period. This is slightly higher than the 45 percent of the Budget Estimates (BE) recorded in the same timeframe last year.
Looking at the performance of key infrastructure sectors, their output grew by 3.1 percent in October 2024. This is a significant slowdown compared to the 12.7 percent growth observed in October of the previous year. However, it is worth noting that this monthly production growth was an improvement over the 2.4 percent expansion seen in September 2024.
