Top 3 Reasons Why India’s Q2 FY25 GDP Growth Hit 7-Quarter Low Of 5.4% – News18

Top 3 Reasons Why India’s Q2 FY25 GDP Growth Hit 7-Quarter Low Of 5.4% – News18

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India’s Q2 GDP Growth At 7-Quarter Low: The sharply lower than expected GDP figures reflects the highly disappointing corporate earnings data.

India’s Q2 GDP data has been released.

India’s Q2FY24 GDP growth number has come as a shocker. The seven-quarter-low economic growth of 5.4 per cent is far below the lowest estimate of 6.2 per cent for the quarter. The manufacturing sector has taken the maximum beating. Here’s why India’s Q2 GDP remained at such a low level.

Slower Urban Consumption

High food inflation affected urban spending during the July-September quarter. Retail food prices, which make up nearly half of the consumption basket, rose 10.87 per cent year-on-year in October, eroding households’ purchasing power.

“The GDP data for Q2 this year are a reflection of the vagaries of monsoons, as well as slower than expected consumption growth in urban areas,” Vineet Agarwal, managing director of Transport Corporation of India (TCI).

The recent quarterly numbers, especially auto and FMCG sectors, were below expectations and pointed to a slower urban demand.

Anitha Rangan, economist at Equirus, said while the slowdown was anticipated as the government spending, especially capex was weak, urban consumption witnessed a slackening. “However, this print is lower than expectations.”

Manufacturing A Big Hit

India’s manufacturing sector has been hit significantly in Q2FY25. It grew just 2.2 per cent during the quarter, compared with nearly 5 per cent expectations and the 7 per cent growth last quarter and 14.3 per cent a year ago.

“The sharply lower than expected GDP figures reflects the highly disappointing corporate earnings data. The manufacturing sector appears to have taken the maximum beating,” said Upasna Bhardwaj, chief economist at Kotak Mahindra Bank.

She, however, added that the high-frequency data suggests that festive-linked revival in activity may provide a marginally better 2H growth figure but overall GDP growth for FY25 is going to be around 100bps lower than RBI’s estimate of 7.2%.

Equirus’ Rangan said, “Three sectors that witnessed sub-par growth were manufacturing (2.2%), mining (-0.1%) and electricity (2.2%).”

Discrepancies

Sujan Hajra, chief economist and executive director at Anand Rathi Shares and Stock Brokers, said, “This weakness in the GDP numbers was largely due to net of these, GDP growth remained at a healthy 7.5 per cent.”

India’s Q2 GDP Data

India’s gross domestic product (GDP) grew 5.4 per cent during the July-September 2024. India still remains the fastest major economy in the world. The Q2 FY25 growth of 5.4 per cent is below analysts’ expectations, who had pegged the growth in the range of 6.2 per cent to 6.9 per cent.

“Real GDP has been estimated to grow by 5.4% in Q2 of FY 2024-25 over the growth rate of 8.1% in Q2 of FY 2023-24,” the finance ministry said in a statement.

News business » economy Top 3 Reasons Why India’s Q2 FY25 GDP Growth Hit 7-Quarter Low Of 5.4%



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