Sat Nov 30 06:52:11 UTC 2024: ## India’s GDP Growth Slows to 5.4% in Q2, Raising Concerns but Sparking Hope for Rebound
**NEW DELHI** – India’s economic growth slowed significantly in the second quarter of fiscal year 2024-25, reaching 5.4%, its weakest performance in nearly two years. This figure, released Friday by the Ministry of Statistics and Programme Implementation (MoSPI), fell short of economists’ expectations of 6.5% and marked a decline from 6.7% in Q1 and 8.2% in the same period last year.
The slowdown was attributed to a combination of factors, including a slump in manufacturing (2.2% growth, down from 14.3% year-on-year), disappointing corporate earnings, and a weakening in urban consumption. However, economists remain cautiously optimistic about a rebound in the second half of the fiscal year, fueled by anticipated increases in government spending, the ongoing festival season, and robust rural consumption.
While India remains one of the world’s fastest-growing major economies, the lower-than-expected growth has prompted some economists to revise their full-year GDP growth projections downward. Kotak Mahindra Bank’s chief economist, Upasna Bhardwaj, predicts growth will fall around 100 basis points below the Reserve Bank of India’s (RBI) forecast of 7.2%. Bank of Baroda’s chief economist, Madan Sabnavis, offers a similar prediction, estimating growth between 6.6% and 6.8%.
Despite the slowdown, the RBI is not expected to lower interest rates at its upcoming meeting, citing concerns over inflation and geopolitical uncertainties. The repo rate remains unchanged at 6.5%.
Chief Economic Advisor V. Anantha Nageswaran attributed some of the slowdown to excessive rainfall, election-related uncertainties, and global trends impacting manufacturing. He highlighted the need for structural reforms, increased public investment, and addressing barriers to capital formation. Other economists point to a recent revival in rural consumption as a positive sign.
While the weak GDP figures have sparked debate about potential monetary policy adjustments, most experts anticipate a “wait-and-watch” approach from the RBI, with any rate cuts likely postponed until February 2025 at the earliest. The slowdown, coupled with disappointing corporate earnings, has fueled market concerns, though the softening of the 10-year government bond yield suggests some anticipation of a more dovish RBI stance. The uneven performance across sectors, with agriculture, hospitality, and transport showing resilience, adds complexity to the economic picture.
First Piper 