India’s economic growth rate has decelerated to a 15-month low of 6.7% for the April-June quarter of the fiscal year 2024-25, primarily due to weaker performance in the agriculture and services sectors, according to government data released on August 30, 2024. This marks a significant drop from the 8.2% growth rate recorded in the same quarter of the previous fiscal year, 2022-23.
Despite this slowdown, India remains the fastest-growing major economy, outperforming China, which registered a growth rate of 4.7% during the same period. The last time India’s growth rate was this low was in the January-March quarter of 2023 when it was recorded at 6.2%.
The key infrastructure sectors also witnessed a slowdown, with growth falling to 6.1% in July 2024.
Aditi Nayar, Chief Economist and Head of Research & Outreach at ICRA, explained, “India’s GDP growth expectedly slowed down in Q1 FY2025 relative to Q4 FY2024 (to a five-quarter low of 6.7% from 7.8%), even as the GVA growth surprisingly accelerated between these quarters (to 6.8% from 6.3%). This divergent trend was led by the normalization of the growth in net indirect taxes, and the slowdown in the GDP growth is not a cause for alarm, in our view.”
The National Statistical Office (NSO) data revealed that the gross value added (GVA) in the agriculture sector declined sharply, with growth slowing to 2% in the April-June quarter of 2024-25, down from 3.7% in the same period of the previous fiscal year.
Similarly, the GVA in ‘financial, real estate and professional services’ also saw a reduction, with growth slowing to 7.1% in the April-June quarter, compared to 12.6% a year earlier.
Conversely, the manufacturing sector showed signs of acceleration, with GVA growth increasing to 7% in the first quarter of the current fiscal year, compared to 5% in the corresponding quarter of the previous year.
According to the NSO, “Real GDP or GDP at Constant Prices in Q1 of 2024-25 is estimated at ₹43.64 lakh crore against Rs 40.91 lakh crore in Q1 of 2023-24, showing a growth rate of 6.7%.” The statement further highlighted that nominal GDP, or GDP at current prices, for Q1 of 2024-25 is estimated at ₹77.31 lakh crore, compared to ₹70.50 lakh crore in Q1 of 2023-24, indicating a growth rate of 9.7%.
Sector-wise performance was mixed in the April-June quarter. The ‘mining and quarrying’ sector showed modest growth, with GVA rising to 7.2% compared to 7% in the same period last year. The sectors comprising electricity, gas, water supply, and other utility services recorded a significant increase, growing by 10.4%, up from 3.2% a year ago.
The construction industry also experienced robust growth, expanding by 10.5% in the first quarter, compared to an 8.6% increase in the same period of the previous fiscal year.
In contrast, the trade, hotels, transport, communication, and services related to broadcasting sectors experienced a notable slowdown, with growth decelerating to 5.7% in the April-June 2024 quarter, down from 9.7% in the corresponding period last year.
However, there was an improvement in public administration, defense, and other services, which grew by 9.5%, up from 8.3% a year ago.
The real GVA for Q1 of 2024-25 is estimated at ₹40.73 lakh crore, up from ₹38.12 lakh crore in Q1 of 2023-24, reflecting a growth rate of 6.8%, a decrease from the 8.3% growth rate recorded in the same period last year. Meanwhile, nominal GVA for Q1 of 2024-25 is estimated at ₹70.25 lakh crore, compared to ₹63.96 lakh crore in Q1 of 2023-24, showing a growth rate of 9.8%, up from 8.2% a year ago.
Despite the slowdown in the overall GDP growth, the growth in certain sectors, such as manufacturing, construction, and utilities, indicates resilience and potential areas of strength for the Indian economy. However, the weakened performance in key sectors like agriculture and services suggests challenges ahead, particularly if these trends persist.
Economists remain cautiously optimistic, noting that while the slowdown is a concern, it does not necessarily indicate a long-term trend. Factors such as monsoon performance, global economic conditions, and domestic policy measures will likely influence the economic outlook for the remainder of the fiscal year.
As the government continues to monitor economic indicators closely, there may be a need for targeted policy interventions to support growth in underperforming sectors and sustain momentum in the stronger segments of the economy. This balanced approach could help maintain India’s position as the fastest-growing major economy, despite the current challenges.
