India’s GDP Growth Slows to 5.4% in Q2 FY 2024-25

The Indian government has reported a significant slowdown in GDP growth, with the rate dropping to 5.4% in the second quarter of the financial year 2024-25. This marks a seven-quarter low and represents a sharp decline from the 8.1% growth recorded in the same quarter of the previous year.

Factors

1. Weak Private Consumption:
   • Private consumption, accounting for about 60% of India’s GDP, has declined
   • Urban areas particularly affected
   • High food inflation and increased borrowing costs impacting household spending
2. Inflationary Pressures:
   • Retail food inflation rate reached 10.87% year-on-year in October 2024
   • Rising food prices squeezing household budgets
3. Decline in Key Sectors:
   • Manufacturing sector grew by only 2.2%
   • Mining and quarrying contracted by 0.1%
4. Government Spending:
   • Government final consumption expenditure rose by 4.4%
   • Increase insufficient to counterbalance overall economic slowdown

Economic Outlook

Some economists anticipate recovery in the latter half of the fiscal year, driven by potential improvements in rural consumption and increased government spending. However, analysts caution that the overall economic environment remains challenging, with many institutions revising growth forecasts downward.

This GDP growth slump raises concerns about economic stability and highlights significant challenges stemming from inflation and reduced consumer spending capacity.

—

👉 Thanks for reading.

Also Read: Massive FII Sell-Off: Over ₹42,000 Crore Exited Indian Markets in November