Government data released on Friday, November 29, revealed that India’s economic growth decelerated to 5.4% in the second quarter of the current fiscal year (Q2 2024), covering July to September. This marks a sharp decline from the 8.1% growth reported for the same period in 2023.
India's GDP for the second quarter of the fiscal year 2024 slowed down to 5.4 per cent. File image
This is the lowest GDP growth rate recorded in the past seven quarters.
The figure fell significantly short of analysts' expectations. A survey of 11 economists by Moneycontrol, along with another by CNBC-TV18, had both forecasted a median growth rate of 6.5%.
What Caused the Slowdown in Economic Growth?
The slowdown has been linked to reduced government spending due to the general elections, alongside weak consumer demand.
Economists have specifically highlighted that private consumption, which makes up around 60% of India’s GDP, has been impacted by a decline in urban spending.
Urban consumption has, in turn, been affected by rising food inflation, higher borrowing costs, and stagnant real wage growth, even as rural demand shows signs of recovery.
Moreover, the adverse effects of climate change on several key industries are also being cited as contributing factors to the subdued growth.
Despite experiencing the slowest growth in the past seven quarters, India continues to be the fastest-growing major economy in the world.
Varied Trends Across Sectors
Sectoral performance exhibited mixed results. Agriculture, a key sector in India's economy, saw an improvement, rising to 3.5 percent from 1.7 percent year-on-year.
In contrast, mining contracted by 0.1 percent, a sharp decline from the strong 11.1 percent growth seen in the previous year. Similarly, manufacturing growth slowed to 2.2 percent, down from a robust 14.3 percent year-on-year.
This slowdown is already reflected in Q2 corporate earnings.
In addition to the Q2 GDP data, economic growth for the first half of the current fiscal year also decelerated, dropping to 6 percent for the April-September period of 2024, compared to 8.2 percent for the same period in 2023.
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