A Shock To India’s Economy: A Great Decline In India’s GDP to Multi-Quarter Low of 5.4% In Q2 of 2024.

India, the fifth-largest economy in the world and poised to be the fastest-growing major economy over the next three years, aims to secure the third-largest economy globally but is experiencing a shocking decline in the next few quarters.

Let’s find out what is going on in the Indian economy, why it’s so, and many more things in detail.

India’s GDP Growth Slows to Seven-Quarter Low of 5.4% in Q2 of Fy25.

Image Source – google / Image By – The Economic Times

India’s GDP growth shows a moderate to Seven-quarter low of 5.4% in the second quarter of FY25, while it did 8.1% last year in the same period and 6.7% in the previous quarter, according to the government data released on Friday.

The economic survey projected India’s GDP to grow at 6.5-7 percent in 2024-25, down from a high of 8.2 percent in the preceding fiscal year. A survey by The Economic Times of 15 economists had forecast GDP growth at 6.5 percent, on the other hand, Reuters Poll gave the same figure which was lower than the Reserve Bank of India (RBI) estimate of 7%.

When the GDP growth showed to be down from expectation it shook the Indians, and then the government and RBI were forced, to ask what was going on in India. What is RBI and the current ruling party BJP government?

What is The Reason Behind This Slump In India’s GDP Growth?

It was because several sectors performed the worst they always did. Look at the performance of the sectors below one by one:

Source – Economic Times

Private Final Consumption Expenditure (PFCE), a major GDP driver, extended at a rate of 6.0% growth in Q2, up from 2.6% in the same period last year. Government Final Consumption Expenditure (GFCE) made a recovery, growing by 4.4% after several quarter’s negative growth.

Agriculture: The agriculture sector bounced back with a 3.5 percent growth rate in Q2 of FY2024-2025, recovering from the sub-optimal performance in the past four quarters.

Manufacturing and Mining: The manufacturing sector shows a sluggish growth of 2.2%, down from 14.3% which was last year at the same time period. While mining was worse than Manufacturing, which recorded a negative performance of -0.1%, and last year at the same time period it had grown at an 11.1% rate.

Construction: The construction sector drove a growth rate of 7.7% in Q2 because of sustained domestic steel consumption which is still a negative performance from the last year at the same period.

Services: The services sector showed a robust 7.1% growth, with the trade, hotels, and transport segments registering 6.0% growth which is positive from the last year.

What Will Happen Next?

Economists are divided on the path of India’s GDP comeback on the track forward after this shock. Where some economists expect a pick-up during the second half of the fiscal year and others caution that the recovery could be modest and uneven. Now one this is certain: The RBI’s next monetary policy decision on December 6 will be closely looked out.

Conclusion

This GDP drawback is going to affect the Inflation rate which surged by 10.87% in retail food. Enterprises are going to report their weakest earnings, and consumption trends which cover 60% of the GDP are now getting sluggish due to high borrowing costs and stagnating wage growth.

Overall, it will affect the whole country and create problems in every field of growth. It will especially reduce the attraction of international investors to India. All these things will put India back for a particular time.

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