India’s GDP growth rate in Q2FY2024-25 is 5.4%, slower than the previous quarter’s 6.1%, as per government data.
The slowdown in growth indicates some growing challenges: low private consumption, slow exports, and the continuing impact of inflation on economic recovery.
Data from the National Statistical Office (NSO) indicate that the service sector, which contributes heavily to GDP in India, registered moderate growth.
Agriculture, an always-stabilizing factor, also underachieved expectations owing to erratic distribution of monsoon rains.
Manufacturing output growth was slow, insufficient to mitigate sluggish consumer spending and investment activity.
Geopolitical tensions and an overall slowdown in export markets contributed to a slowdown in the Indian economy.
Inflation and pricing trends of food and energy dampened the level of consumption by households, a crucial contribution to GDP growth.
Sectoral Review
Agriculture and allied activities: The agriculture sector’s growth slowed to 3.4%, despite subpar performance in Q1 due to inconsistent rainfall.
Manufacturing: With a growth rate of 2.8%, manufacturing is indicative of slowed recovery of industrial activity.
Services: Although still the bulwark of the economy, the sector saw growth dock to 6.5% from 7.8% in Q1.
Construction and Infrastructure: Construction exhibits steady growth of 6.2%, supported by public expenditure directed into infrastructure development.
Economic Outlook
Economists continue to expect moderate optimism for the second half of the financial year, driven by festive demand and a sickly recovery in export activity.
The Reserve Bank of India (RBI) indicated a steady GDP growth rate at 6.5% for FY 2024-25, even with risks stemming from global headwinds and domestic inflation.
Government Initiatives and Challenges
The government has implemented measures to boost economic activity, including enhanced credit support for small businesses as well as increased capital expenditure on infrastructure.
However, to sustain growth, it is imperative to address the structural issues that have caused low private investment and stagnation of rural demand.
While India’s Q2 GDP numbers exemplify the resilience of an Indian economy in a testing global environment, the slowdown must be taken seriously as a reminder of certain vulnerabilities that need the full attention of the Government, policymakers, and stakeholders to ensure long-term growth and economic stability amid such global vagaries.
