India’s GDP Growth Dips to 5.4% in Q2, Still One of the World’s Fastest Growing Economies; What Lies Ahead?

India’s economic journey continues to attract global attention, with the latest government data showcasing a mixed bag for the July-September quarter (Q2) of the 2024-25 financial year. While the nation remains among the fastest-growing major economies, its Q2 performance reflected a slowdown compared to expectations. Let’s unpack the details and implications.

India’s Q2 GDP Growth Slows but Remains Steady

According to the Ministry of Statistics and Programme Implementation, India’s real GDP grew by 5.4% in Q2 of 2024-25, reaching ₹44.10 lakh crore compared to ₹41.86 lakh crore in the same quarter last year. This growth rate fell short of the Reserve Bank of India’s (RBI) earlier forecast of 7%, reflecting a tempered pace against the 8.1% growth recorded in Q2 last year.

In the preceding April-June quarter, the Indian economy grew by 6.7%, also slightly below RBI’s 7.1% projection. Despite these lower-than-expected numbers, experts remain optimistic about the country’s economic resilience.

Key Factors Behind India’s GDP Slowdown in Q2 2024-25

India’s economic growth slowed to 5.4% in Q2 2024-25 due to several challenges. The manufacturing sector grew by only 2.2%, a sharp drop from the previous year. Mining and quarrying almost stagnated with a mere 0.01% growth. The utility services, including electricity and water supply, expanded by just 3.3%, much slower than last year. Construction growth also weakened to 7.7%, down from 13.6%. These factors combined to impact the overall GDP growth in Q2.

What Do Forecasts Say About India’s GDP Trajectory?

The RBI, in its recent monetary policy review, maintained an overall growth projection of 7.2% for 2024-25. Other institutions, including the International Monetary Fund (IMF) and global rating agencies, have echoed similar optimism, pegging India’s GDP growth at approximately 7%.

For the upcoming quarters, the RBI has forecast 7.4% growth for both Q3 and Q4, indicating an anticipated revival fueled by festive spending and increased private consumption. Notably, private consumption has rebounded robustly, with the October-December period witnessing significant festive demand, particularly for consumer goods.

A Stronger Medium-Term Outlook

While Q2’s modest growth may seem concerning, the slowdown is likely temporary. The RBI recently highlighted in its bulletin that the Indian economy’s medium-term outlook remains “bullish.” Factors such as steady private consumption, infrastructure investments, and global recognition of India as a reliable market continue to support this confidence.

The Bigger Picture

India’s GDP has consistently demonstrated its strength, with growth rates of 8.2% in 2023-24 and 7.2% in 2022-23. Despite global uncertainties, the nation’s economic momentum remains firmly rooted, making it a beacon for emerging markets. As the festive season uplifts domestic demand and fiscal measures stabilize the macroeconomic environment, India is poised to maintain its trajectory as a global growth leader.

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The post India’s GDP Growth Dips to 5.4% in Q2, Still One of the World’s Fastest Growing Economies; What Lies Ahead? appeared first on DNP INDIA.

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