India's Q2 GDP growth slows to 5.4 per cent, hits 18-month low

In a significant development, India's economic growth decelerated to 5.4% in the July-September quarter of the current fiscal year, marking its slowest pace in nearly two years. This is a significant drop from the 8.1% growth recorded in the same period last year, as per official data released on Friday.  

India’s GDP growth for the July-September quarter fell sharply to 5.4%, marking an 18-month low, as per data released by the National Statistics Office (NSO) on Friday. The number represented a sharp drop from 6.7% in the April-June quarter and 8.1% in the same time last year, and it was far lower than the Reuters poll projection of 6.5%.

Gross Value Added (GVA), a gauge of economic activity across sectors, grew by 5.6%, falling short of the 6.5% prediction. Compared to growth of 6.8% in the previous quarter and 7.7% year over year, this was a significant deceleration.

The quarter's sectoral performance provided a conflicting image. Agriculture reported 3.5% increase, up from 1.7% a year earlier and 2% in the preceding quarter. But the mining industry shrank by -0.1%, a dramatic turnaround from Q1FY25's 7.2% increase and 11.1% year-over-year growth.

Compared to the same quarter last year, when manufacturing growth was 14.3%, and the preceding quarter, when it was 7%, manufacturing growth slowed dramatically to 2.2%. After increasing 10.5% year over year and 10.4% sequentially, the power segment dipped to 3.3%.

A major engine of economic activity, construction saw growth of 7.7%, less than the 10.5% increase in Q1FY25 and the 13.6% growth in the previous year. Trade, lodging, and transportation all had slight improvements, growing by 6% as opposed to 4.5% annually and 5.7% sequentially.

Professional, financial, and real estate services expanded by 6.7%, which was less than the 7.1% growth in the previous quarter but still a little improvement over the 6.2% growth in the same period last year. Government spending on public administration and other services increased by 9.2%, which was marginally less than the 9.5% growth in Q1FY25 but still higher than the 7.7% growth in the previous year.

Meanwhile, during the July-September 2024 quarter, US GDP grew 2.8 per cent. The UK inched up just 0.1 per cent. China expanded by 4.6 per cent during the latest quarter (Q3) and is struggling to touch 5 per cent for the full FY25. Japan grew 0.9 per cent during the quarter.