India’s economy grew at 6.7% in the April-June quarter, marking the slowest pace in five quarters, according to data released by the statistics ministry on Friday. This follows a 7.8% expansion in the previous quarter.
The expansion was slower than anticipated. A Mint poll of 25 economists had projected India’s economic growth to slow to 6.85% in the April-June quarter. The slowdown has been attributed to a lack of economic momentum during the general elections, muted government capital expenditure, and an uneven monsoon.
In Q1FY25, real GDP (at constant prices) is estimated at ₹43.64 trillion, up from ₹40.91 trillion a year earlier. Nominal GDP (at current prices) is estimated at ₹77.31 trillion, compared to ₹70.50 trillion in the previous year.
The agriculture sector grew 2% in the April-June quarter of the current fiscal year, down from 3.7% in the same period of 2023-24, according to data released on Friday. Meanwhile, the manufacturing sector saw an acceleration, with growth rising to 7% in the first quarter of this fiscal year, compared to 5% in the previous year.
Economists had anticipated a slowdown in Q1 FY25 growth due to a high base effect, adverse weather conditions, and restrictions on government activities caused by the election code of conduct during the quarter. The Reserve Bank of India’s (RBI) decision to keep the repo rate unchanged at 6.5% since February 2023 also contributed to the deceleration.
“A slowdown in GDP was expected. We have evidence from this quarter’s data that there is a slowdown in the economy. Immediate revival of private capex is required” said Debopam Chaudhuri, chief economist at Piramal Enterprises Ltd. He added, “The more the the RBI delays the rate cut, the revival of the economy is likely to get more delayed, and possibly, at some point, impact GDP growth putting it beyond the control of the monetary policy.”
Despite the slowdown, some experts see a positive outlook in the underlying data, noting an increase in private consumption and a modest improvement in investment activity.
“The lower growth rate can be attributed to a high base effect, adverse weather conditions, and restrictions on government activities due to the code of conduct during the general elections. Additionally, unlike the previous quarter, the unexplained component of GDP acted as a drag rather than a boost to growth,” said Sujan Hajra, chief economist & executive director, Anand Rathi Shares and Stock Brokers.
“Looking ahead, we anticipate full-year GDP growth for the current financial year to align closely with our estimate of 7%. This robust growth, coupled with falling inflation, is expected to support continued outperformance in the Indian equity market. However, the strong growth figures may prompt the Reserve Bank of India (RBI) to maintain the current monetary policy rates throughout 2024,” he added.
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