India's economy grew by 6.7% in the April-June quarter of FY25, marking the slowest growth in five quarters, according to data from the Statistics Ministry. This follows a 7.8% expansion in the previous quarter.
The slowdown was sharper than expected. A poll of 25 economists had forecasted a growth rate of 6.85% for the April-June quarter. The deceleration is attributed to a lack of economic momentum during the general elections, subdued government capital expenditure, and an uneven monsoon.
In Q1 FY25, India's real GDP (at constant prices) is estimated at Rs 43.64 trillion, up from Rs 40.91 trillion in the same period last year. Nominal GDP (at current prices) is estimated at Rs 77.31 trillion, compared to Rs 70.50 trillion in the previous year.
The agriculture sector saw growth slow to 2% in the April-June quarter, down from 3.7% in the same period of the previous year. However, the manufacturing sector showed improvement, with growth accelerating to 7%, compared to 5% in the previous year.
Economists had anticipated the slowdown due to factors such as a high base effect, adverse weather, and restrictions on government activities during the election period. The Reserve Bank of India's (RBI) decision to keep the repo rate unchanged at 6.5% since February 2023 also played a role in the slower growth.
"A slowdown in GDP was expected. Immediate revival of private capital expenditure is required," said Debopam Chaudhuri, Chief Economist, Piramal Enterprises Ltd. He warned that delays in rate cuts by the RBI could further delay economic recovery.
Despite the overall slowdown, some analysts see positive signs in the data, including increased private consumption and modest improvements in investment activity.
"The lower growth rate can be attributed to a high base effect, adverse weather conditions, and election-related restrictions. However, we anticipate full-year GDP growth for FY25 to align closely with our estimate of 7%. This strong growth, alongside falling inflation, is expected to support continued outperformance in the Indian equity market," said Sujan Hajra, Chief Economist & Executive Director, Anand Rathi Shares and Stock Brokers. He also noted that the strong growth figures might prompt the RBI to maintain current monetary policy rates throughout 2024.
(Mint)
