29th November, 2024
Summary: India’s real Gross Domestic Product (GDP) growth for the July-September quarter (Q2) of FY 2024-25 has slowed to 5.4%, the lowest in seven quarters, according to data released by the National Statistics Office (NSO). This marks a decline from 6.7% in Q1 FY 2024-25 and 8.1% in the corresponding period last year.
Key Aspects of Q2 FY 2024-25 GDP Data
Negatives: Manufacturing growth sharply decelerated to 2.2%, compared to 7% in Q1 and 14.3% a year ago, indicating stress in the industrial sector. Mining contracted by 0.1%, marking its weakest performance in eight quarters, likely impacted by prolonged rainfall and global commodity market pressures. Gross fixed capital formation (GFCF), a key indicator of investment activity, slowed to 5.4%, the lowest in six quarters, signaling reduced investment appetite. Trade figures also pointed to a softening of external demand, with export growth slowing to 2.8%, while imports contracted by 2.9%, raising concerns about the sustainability of trade-driven contributions to growth.
Positives: Amid the slowdown, some areas displayed resilience. The agricultural sector grew at 3.5%, an improvement from 2% in Q1, supported by favorable monsoon conditions and robust rural consumption. Services, particularly trade, hotels, and communications, grew at 6%, up from 5.7% in the previous quarter, signaling stable momentum in consumer-facing industries. Additionally, government consumption rebounded, growing by 4.4%, following a contraction in Q1, indicating renewed fiscal support.
Impact on RBI’s MPC Meeting
The subdued GDP data will likely influence discussions in the upcoming RBI MPC meeting scheduled on 6th December. While the slowdown may prompt calls for accommodative measures, inflationary pressures and global uncertainties could limit such actions. The RBI might focus on supporting credit growth and key sectors like manufacturing, though concrete steps remain unclear. The central bank’s approach will depend on its assessment of growth and inflation risks, and only time will tell how it balances these priorities.
