India’s real GDP growth slumped to a multi-quarter low of 5.4% in the July to September 2024 Q2 , from a five-quarter nadir of 6.7% in Q1, with GVA growth slowing to 5.8% from 6.8% in Q1.
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. 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.
