India’s GDP Growth Slows to 15-Month Low at 6.7%

India’s economy grew at 6.7% in the April-June quarter, marking the slowest pace of expansion in 15 months, according to data released by the statistics ministry on Friday. This is down from a 7.8% growth rate in the previous quarter.

The growth rate fell short of expectations. Economists surveyed by Mint had forecasted a 6.85% increase. The slowdown is attributed to several factors, including subdued economic activity during the general elections, lower government spending, and an uneven monsoon season.

In the first quarter of FY25, India’s real GDP (adjusted for inflation) is estimated at ₹43.64 trillion, up from ₹40.91 trillion a year earlier. The nominal GDP (at current prices) stands at ₹77.31 trillion, compared to ₹70.50 trillion last year.

The agriculture sector grew by just 2% in this quarter, a decrease from 3.7% in the same period last year. In contrast, the manufacturing sector saw a boost, with growth rising to 7% from 5% a year ago.

Economists had predicted this slowdown due to a high base effect from last year, adverse weather conditions, and restrictions imposed during the election period. Additionally, the Reserve Bank of India (RBI) has kept its repo rate steady at 6.5% since February 2023, which also contributed to the economic deceleration.

Debopam Chaudhuri, chief economist at Piramal Enterprises Ltd., noted, “The slowdown was anticipated. Immediate action to revive private investment is crucial. If the RBI delays cutting rates, economic recovery could be further postponed, potentially impacting GDP growth.”

Despite the slowdown, some experts remain optimistic about the future. They point to an increase in private consumption and a modest rise in investment activity.

Sujan Hajra, chief economist at Anand Rathi Shares and Stock Brokers, said, “The lower growth rate can be attributed to a high base effect, adverse weather, and election-related restrictions. Looking ahead, we expect full-year GDP growth to align with our estimate of 7%. This growth, combined with falling inflation, could boost the Indian equity market. However, strong growth might lead the RBI to maintain current interest rates throughout 2024.”