“India’s real Gross Domestic Product (GDP) growth slumped to a multi-quarter low of 5.4% in the July to September 2024 quarter (Q2 of 2024-25), from a five-quarter nadir of 6.7% in Q1, with Gross Value Added (GVA) growth slowing to 5.8% from 6.8% in Q1,” as per the National Statistical Office (NSO).
This is the slowest GDP growth in seven quarters — the last occasion growth was lower was the October-December 2022 quarter when GDP had risen 4.3%.
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Real GDP growth stood at 8.1% in the second quarter of 2023-24, while GVA growth was 7.7% in that quarter.
Reserve Bank of India (RBI) officials, had in its October bulletin, estimated GDP growth of 6.8% in Q2 citing economic activity indicators, while the Central bank’s official estimate, as enunciated in its latest monetary policy review, was 7%.
Barring Agriculture and Services sectors, all segments of the economy reported a sharp deceleration from a year ago, with Mining and Quarrying GVA slipping into the red with a contraction of 0.1%, from an 11.1% uptick in Q2 last year.
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Agriculture, livestock, forestry and fishing GVA grew 3.5%, more than double the 1.7% uptick recorded a year ago.
Manufacturing growth also hit a bump to drop to a mere 2.2% from 14.3% in Q2 of last year, while construction GVA rose 7.7%, about half the 13.6% uptick a year earlier.
Electricity, gas, water supply and other utility services’ GVA rose 3.3%, compared to 10.5% in July-September of 2023.
Public Administration, Defence and other services led the acceleration among services, with GVA rising 9.2% from 7.7% last year. GVA for trade, hotels, transport, communication and services related to broadcasting improved 6.6% from 4.5% a year earlier, while it was 6.7% higher for financial, real estate and professional services, marginally better than the 6.2% rise in Q2 of 2023-24.
“Despite sluggish growth observed in manufacturing (2.2%), mining and quarrying (-0.1%) sectors in Q2 of FY 2024-25, real GVA in H1 (April-September) has recorded a growth rate of 6.2%,” the NSO noted.
On the bright side, the NSO highlighted a rebound in consumption spending, pointing to a 6% growth in Private Final Consumption Expenditure (PFCE) in Q2 this year over the growth rate of 2.6% a year ago. However, this marks a slowdown from the first quarter of this year, when PFCE had risen 7.4%, the fastest in six quarters.
Growth in gross fixed capital formation, an indicator of capital investments in the economy, slipped to 5.4% from 7.5% in Q1, reflecting the slowest pace in at least six quarters.
While the RBI has projected a full-year GDP growth of 7.2% and the Finance Ministry expects growth in the 6.5% to 7% range, this may require a sharp rebound in the second half of the year with real GDP rising 6% between April and September as per the NSO data. This is the slowest six-month growth print since the second half of 2022-23 when GDP rose 5.3%, and markedly lower than the 8.2% rise recorded in the first half of 2023-24.
Real GVA growth for the first half of 2024-25 is estimated at 6.2%, marginally higher than the GDP print, reversing a trend of GDP growth surpassing the value added in the economy seen through 2023-24.
Spliced sectorally, the first half of this year (H1) has seen a growth acceleration in just one segment — Public Administration, Defence and other services whose GVA has risen 9.3% from 8% in H1 of 2023-24. For electricity, water and other utility services, the growth pace remains unchanged from H1 last year at 6.8%.
The NSO said that agriculture and allied sector has bounced back by registering a growth rate of 3.5% in Q2 of FY 2024-25 after sub-optimal growth rates ranging from 0.4% to 2.0%, observed during previous four quarters. However, the farm sector GVA growth in the first half of the year is 2.7%, slower than a 2.8% uptick recorded in the same half of last year.
“The sharply lower than expected GDP figures reflects the highly disappointing corporate earnings data and the manufacturing sector appears to have taken the maximum beating,” remarked Kotak Mahindra Bank chief economist Upasna Bhardwaj. While the festive season spending may prop up growth in the second half of the year, she reckoned that 2024-25 growth could slip by around one percentage point relative to the RBI’s 7.2% estimate.
Published – November 29, 2024 04:24 pm IST
