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India's economy showed signs of slowing down in the second quarter (Q2) of FY 2024-25, with the country’s GDP growth decelerating to a much lower-than-expected 5.4%. This marks a sharp decline from the 8.1% growth recorded in the same quarter of FY 2023-24. The latest data underscores the challenges faced by the economy amid global uncertainties and domestic pressure.
Analysts had expected a year-on-year growth rate of around 6.5% for the September quarter, making the actual 5.4% figure a significant disappointment. The country's performance in Q2 also falls short of the Reserve Bank of India's (RBI) forecast of 7% for the quarter and represents a further slowdown from the previous quarter's growth rate of 6.7%.
Despite the overall slowdown, certain sectors displayed positive trends. The manufacturing sector showed a modest expansion of 2.2%, while the mining and quarrying sector saw a slight contraction of -0.1%. These mixed results reflect the challenges within key industries. However, the real Gross Value Added (GVA) in the economy managed to maintain positive momentum, registering a 6.2% growth during the first half of FY 2024-25, between April and September.
Q2 GDP SHOCKER. At 5.4%, India's growth rate slows to its lowest level in 21 months. @latha_venkatesh decodes the data. pic.twitter.com/nzUeoXQ0dh
— CNBC-TV18 (@CNBCTV18News) November 29, 2024
The slowdown in Q2 has led to reduced growth expectations across the board. While the RBI has maintained its full-year GDP growth forecast at 7.2%, down from last year’s 8.2%, several private economists have adjusted their projections downward in light of the disappointing quarterly data. The persistent weakness in manufacturing and mining is a key concern for many analysts, who are increasingly worried about the economy’s capacity to bounce back in the face of persistent global inflationary pressures and tightening financial conditions.
The slowdown also comes amid ongoing challenges such as higher inflation and increased interest rates, which have dampened consumer demand and business investment. This underscores the need for targeted policy interventions to stimulate demand and support key sectors in the coming quarters.
India’s government remains committed to long-term reforms, with a focus on infrastructure development, export growth, and creating a more resilient economy. However, with global headwinds and domestic challenges continuing to weigh on growth, the outlook for the rest of FY 2024–25 remains uncertain.
