India's economic growth slowed to 5.4% in the second quarter of FY25, a significant drop from 8.1% in the same quarter last year and 6.7% in the previous quarter (April-June), according to government data released on Friday. The slowdown aligns with earlier predictions that weaker consumption and adverse weather conditions have impacted key sectors of the economy.
An Economic Times survey of 17 economists had forecasted a median GDP growth of 6.5%, attributing the decline to slower urban demand, lower government spending, and disruptions caused by heavy rains that affected mining and electricity sectors. A separate poll by Reuters had also predicted a growth rate of 6.5%, which is below the Reserve Bank of India’s (RBI) estimate of 7%.
In terms of sectoral performance, growth in Manufacturing was weak at just 2.2%, and the Mining & Quarrying sector saw a slight contraction of -0.1% in Q2 of FY2024-25. However, real Gross Value Added (GVA) for the first half of FY25 (April-September) grew at a rate of 6.2%, indicating some economic activity despite the slowdown.
Gross Value Added (GVA), which measures economic activity, was expected to grow at a slower rate of 6.3% in Q2, compared to 6.8% in the previous quarter. This reflects reduced momentum across various sectors. This quarter, real GVA grew by 5.6%, down from 7.7% in the same quarter last year. Nominal GVA saw a growth of 8.1% in Q2 FY25, lower than the 9.3% growth recorded in Q2 of the previous fiscal year.
Private Final Consumption Expenditure (PFCE), which reflects household spending, saw growth of 6.0% in Q2 and 6.7% for the first half of FY25. This is an improvement compared to the 2.6% and 4.0% growth rates seen in the same periods of the previous financial year, according to official data.
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