The Indian economy's slowdown fears are here and real.
Official data shows that real GDP grew by 5.4% in Q2, FY25 as against 8.1% a year ago, sorely missing both the RBI and consensus estimates of 7% and 6.2%-6.8%, respectively.
While key growth drivers like agriculture and consumption barely managed to avoid the crash cart, the industrial sector's growth remained thin as a toothpick, even as investments lost some of their bulldog spirit.
No one in the policy circuit had expected Q2 to be easy, but the sharper-than-expected slowdown punctures all efforts to create jobs and improve wage growth, and it's likely that we may start the new year feeling fragile and on the backfoot. Which is why both the finance minister and commerce minister had called for interest rate cuts, though the RBI remains firm.
As it is, price rise and unemployment continue to be high, building fear and anger with every breath. Economically and morally, these two, like wives and girlfriends, should never attack you together, but they did, placing a heavy burden on the middle class. Critics and the opposition rightly accuse the government of ignoring their economic plight, while the government, on its part, is reportedly considering rejigging the CPI basket, which can potentially hide the real impact of food inflation.
All we need is the dream quartet of agriculture, private consumption, investments and government expenditure to grow, but they are mysteriously blowing hot and cold, forcing the economy to step onto the banana skin and slip into a slump.
In Q1 too, growth moderated to 6.7%, as against 7.8% in Q4, FY24 and 8.2% in Q1, FY23. Every slip is not a fall, but it appears that India's growth magic runs the risk of being broken.
The Asian tiger was on the prowl to emerge as the third-largest economy with its fantastical world-beating boosterism, but at the halfway point now, FY25's growth prospects appear somewhat fearsome rather than fascinating. So economists are paring down full fiscal FY25 growth projections to 6.8% or thereabouts. In October, the RBI retained its forecast of 7.2%, while the Economic Survey in July pegged it at a modest 6.5%-7%.
According to the data released by the National Statistics Office on Friday, real Gross Value Added (GVA) grew by 5.6% in Q2, FY25 as against 7.7% a year ago, while in H1, FY25, it registered a growth of 6.2%.
In absolute numbers, real GDP at constant prices is estimated at Rs 44.10 lakh crore during Q2, compared to Rs 41.86 lakh crore a year before, while for H1, FY25 it stood at Rs 87.74 lakh crore compared to Rs 82.77 lakh crore the previous year.
On the supply side, while both agriculture and services sector did their bit, the biggest disappointment came from the industrial sector that needs a real barnstormer to move the dial.
The primary sector grew by 3%, which is nearly flat growth both sequentially and over the previous year. Within this, agriculture, and allied sectors saw 3.5% growth, as against 2% and 1.7% in Q1, FY25 and Q2, FY24, respectively. On the other hand, mining and quarrying, however, saw a deceleration of 0.1% as against 7.2% growth in Q1 and 11.1% growth in Q2, FY24.
The agriculture and allied sector has bounced back with 3.5% growth after sub-optimal growth rates ranging from 0.4% to 2% during the past four quarters. Despite sluggish growth observed in manufacturing at 2.2% and mining and quarrying which contracted by 0.1% in Q2, real GVA during the first half of the current fiscal saw a growth of 6.2%.
Industrial sector growth slowed down to 3.9%, as against 8.4% in Q1, FY25 and 13.7% in Q2, FY24. All the three sub-components namely manufacturing, electricity, and other utility services and construction saw a decline. The biggest setback was seen in manufacturing at 2.2% growth, down from 14.3% last year. Likewise, electricity, gas, and other utility services grew by 3.3% compared to 10.5% last year. Construction too was a no-show with 7.7% growth as against 13.6% in Q2, FY24.
The services sector retained the growth momentum at 7.1%, a shade higher than the 6% seen during the same period last year.
The tertiary sector saw 7.1% growth compared to 6% last year. In particular, trade, hotels, transport, communication and services related to broadcasting recorded 6% growth in Q1 as against 4.5% a year before. In the construction sector, sustained domestic consumption of finished steel saw 7.7% and 9.1% growth rates respectively in Q2 and H1 of FY25.
On the expenditure side, private consumption, the largest component accounting for over 56% of the GDP, chucked some luck during Q2. It grew by 6% and 6.7% in Q2 and H1, FY25 respectively, higher than the 2.6% and 4% registered during the same period last year. Sequentially, though, growth slowed down to 6% from 7.4% in Q1.
After observing either negative or low growth rates in the previous three quarters, government expenditure turned the corner registering 4.4% growth as against a contraction of 0.2% observed in Q1. But Q2's growth was significantly lower than the 14% seen last year.
The biggest disappointment came from private investments, which remained a sour spot registering 5.4% growth, down from 7.5% in Q1 and 11.6% in Q2, FY24.
