India's economic growth has hit a seven-quarter low of 5.4% in the second quarter of the fiscal year, raising doubts about the country's ability to achieve a 7% growth target. While some analysts foresee a revival in growth during the latter part of the fiscal year, expectations hover around 6.5% to 6.8% for the full fiscal year 2024-25. However, Chief economic advisor V Anantha Nageswaran remains optimistic, labeling the 5.4% figure as a one-off event and asserting that there is no major concern regarding a sustained decline in urban demand. He attributes this slowdown to improved rural demand and the strong order books of companies.
Nageswaran stresses that it is premature to draw definite conclusions about the full-year GDP growth figure, emphasizing the need to wait for more concrete estimates in January. He cautions against excessive extrapolation and unwarranted concerns, stating that the current estimates are just the initial numbers. The Economic Survey had previously projected a GDP growth range of 6.5% to 7% for the fiscal year 2024-25, indicating a slightly lower growth trajectory compared to previous forecasts. According to official data released in late November, real GDP expanded by 5.4% in the July-September 2024 quarter, while real gross value added grew by 5.6% during the same period.
The growth slowdown in the Indian economy has been attributed to a significant deceleration in sectors like manufacturing and mining, although agriculture and services have shown more resilience. Experts like Upasna Bhardwaj and Madan Sabnavis have expressed varied opinions on the future growth trajectory, with Bhardwaj highlighting disappointing corporate earnings and Sabnavis projecting an average growth rate of 6.6% to 6.8% for the fiscal year. Despite challenges in sectors like manufacturing and mining, analysts like Sujan Hajra remain cautiously optimistic about maintaining a 7% growth projection for the year. Hajra emphasizes the potential positive contribution of agricultural strength and government capital expenditure in driving growth in the second half of the fiscal year.