The National Statistics Office recently released data indicating that India's real GDP grew by 5.4% in the second quarter of the fiscal year 2024-25, showing a decrease from the growth rate of 8.1% in the same quarter of the previous fiscal year. This slower growth was attributed to sluggish performances in sectors such as Manufacturing (2.2%) and Mining & Quarrying (-0.1%) during this period.
Moreover, the Agriculture and Allied sector rebounded, achieving a growth rate of 3.5% in the second quarter of the fiscal year 2024-25 after experiencing sub-optimal performance in the past four quarters. Additionally, the Construction sector experienced growth due to consistent domestic consumption of finished steel, with growth rates of 7.7% and 9.1% in the second quarter and first half of the fiscal year 2024-25, respectively. The Tertiary sector also showed promising growth, with a rate of 7.1% in the second quarter of the fiscal year 2024-25, up from 6.0% in the same quarter of the previous financial year.
Economists identified various factors contributing to the subdued urban private consumption in India, including increasing food inflation, elevated borrowing rates, and stagnant real wage growth, impacting a significant portion of the country's GDP. Despite hopes for a stronger second half, downside risks persisted, prompting a reassessment of annual growth forecasts for the fiscal year. The Government is looking to boost demand through increased spending, while private consumption remains robust, signaling potential for increased investments in the future. Additionally, GVA growth outpaced GDP growth during this period, driven by a strong performance in the agriculture sector, potentially supporting rural demand in the upcoming months.