India Q2 FY25 GDP Growth Data 2024 Highlights: Economic growth slows to 5.4%

Chief Economic Advisor V Anantha Nageswaran on Friday described the economic growth number of 5.4 per cent for July-September quarter as “disappointing” but reassured that the situation is “not alarming.” 

He also listed key factors contributing to the slowdown while pointing to sectors showing resilience.

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Mr. Rahul Agrawal, Senior Economist, ICRA Limited.

The year-on-year (YoY) growth in the core sector inched up to 3.1% in October 2024 from 2.4% in the previous month, despite an adverse base. The performance of the constituent industries was mixed, with four reporting an improvement in their growth between these months, and an equal number witnessing a slowdown.

While the growth in electricity generation improved marginally in October 2024 vis-à-vis September 2024, it remained quite weak at sub-1%, continuing to weigh upon the growth in core sector output in the month. The construction related indicators reported mixed trends, with the growth in steel production improving, while that in cement output deteriorating between these months, although both remained muted.

Economic growth slows to 5.4 pc in July-September 2024 compared to 8.1 pc in year-ago quarter: Govt data

The combined debt-to-GDP ratio of India stands at 83.1 per cent in 2024; it was hovering around 69 per cent until 2018.

It’s well that the Centre is now shifting its focus towards debt reduction with the Finance Minister promising to bring the debt-to-GDP ratio down over the coming years. But this can be achieved only if a clear action plan is drawn up and rigorously implemented to tackle the debt by both the Centre as well as the State governments.

The negative consequences of high debt are many including higher borrowing costs in the economy, instability in currency markets caused by capital outflows, higher inflation expectations. With soaring interest burden and repayment obligations, government spending on other areas can reduce eventually impacting growth.

India’s debt-to-GDP ratio is higher than the global and EM average and needs to be addressed jointly by the Centre and States. For more insight, read the full report.

Fiscal deficit likely to be lower by 19 bps than budget estimates, says India Ratings. 

Centre’s fiscal deficit, the difference between the expenditure and the income, is likely to be 19 basis points (bps, 100 bps mean 1 percentage point) lower than the budget estimates during current fiscal, i.e., Fiscal Year 2024-25, India Ratings & Research (Ind-Ra) said on Wednesday.

Finance Minister Nirmala Sitharaman, while presenting full budget in July this year, had pegged the deficit at 4.9 per cent of GDP. She also said: “The fiscal consolidation path announced by me in 2021 has served our economy very well, and we aim to reach a deficit below 4.5 per cent next year.”

DK Srivastava, Chief Policy Advisor at EY India, cited the contraction in the Government of India’s capital expenditure, which decreased by (-)15.4 per cent during April-September, as one of the main reasons for the slowdown. He emphasised that both fiscal and monetary policy actions are needed at this stage. However, “fiscal policy action in the form of accelerated government investment expenditure should be given the highest priority while monetary policy action may be delayed beyond December 2024. Eventually, as the US Fed continues to roll down its policy rates, India may also follow suit,” he said. 

Aditi Nayar, Chief Economist and Head of Research & Outreach at ICRA, said that Q2 saw tailwinds in terms of a pickup in capex after the Parliamentary Elections, as well as healthy expansion in sowing of major kharif crops. However, several sectors faced headwinds due to heavy rainfall, which affected mining activity, electricity demand, retail footfalls, and led to a contraction in merchandise exports. Additionally, margins appear to have weakened for corporates in various sectors during this quarter. As a result, “we project a slight dip in India’s GVA and GDP growth in Q2 FY2025 to 6.6 per cent and 6.5 per cent, respectively,” she said.

In its report released earlier this week, ICRA projected a slowdown in growth due to heavy rains and weak margins, which offset the buoyancy driven by the turnaround in government capital expenditure and healthy trends in kharif sowing. Further, growth in gross value added (GVA) is estimated to ease to 6.6 per cent in Q2 from 6.8 per cent in Q1 FY2025, driven by the industrial sector (to +5.5 per cent from +8.3 per cent), amid a pick-up in expansion in services (to +7.8 per cent from +7.2 per cent) and agricultural GVA (to +3.5 per cent from +2.0 per cent).

Research agencies estimate that growth likely slowed during the July-September quarter (Q2) of the current fiscal. ICRA projected GDP growth to decline to 6.5 per cent in Q2, compared to 6.7 per cent in the April-June quarter. Earlier, an SBI research report also estimated growth at 6.5 per cent, while CareEdge appears slightly more optimistic, forecasting growth in the range of 6.6 per cent to 6.8 per cent. The RBI’s October bulletin projected a 6.8 per cent growth.

Due to a slowdown in industrial activity, the Indian economy is likely to have slowed down during the three-month period of July-September (Q2 of FY25), with growth estimated between 6.3 per cent and 6.6 per cent. The data will be formally released by the Statistics Ministry on Friday, November 29.

The economic growth rate, based on GDP (gross domestic product), was 6.7 per cent during the April-June quarter (Q1 of FY25). For the fiscal year as a whole, the growth rate is expected to reach 7 per cent.

On November 8, the Ministry of Statistics and Programme Implementation (MoSPI) said it has advanced the release of macroeconomic data ​Gross Domestic Product (GDP)​ estimates by about 90 mins to 4pm.

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​Q1 FY25​: 6.7%

​Q4 FY24​: 7.8%

​Q3 FY24​: 8.3%

​Q2 FY24​: 7.6%

​Q1 FY24​: 7.8%

India consolidated its position as the fastest-growing major economy globally as the Government’s Statistics office on Thursday released the Gross Domestic Product (GDP) data for second quarter spanning July to September months of the financial year 2023-24. 

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With a reduction in government expenditure during the general elections, India’s economy expanded at 6.7 per cent in the April-June quarter (Q1), marking the slowest pace in five quarters. Yet, the government asserted that the growth momentum is strong and a 6.5-7 per cent growth estimate for full fiscal is realistic.

Read full report ​here​