India’s GDP Growth Slows to 6.7% in Q1 FY25

Ira Singh
Khabar Khabaron Ki,31 Aug’24

India’s GDP growth moderated to a quarter low of 6.7% in the April-June period of this fiscal year, down from 8.2% a year earlier, primarily due to weaker performance in the agricultural sector, according to official release on Friday. However, India maintains its position as the fastest-growing major economy globally, surpassing China’s GDP growth of 4.7% for the same quarter. The Real Gross Value Added (GVA) grew by 6.8% in Q1 of FY 2024-25, a decrease from 8.3% in the previous year’s first quarter.

The notable growth in the Secondary Sector, which saw an 8.4% rise driven by sectors such as Construction (10.5%), Electricity, Gas, Water Supply & Other Utility Services (10.4%), and Manufacturing (7.0%), contributed to this performance. The Nominal GVA growth for Q1 of FY 2024-25 has been pegged at 9.8%, an improvement from the 8.2% growth recorded in Q1 of FY 2023-24.

Quarterly estimates & growth rates: India GDP Q1 FY25,Key official Updates:

Real GDP or GDP at Constant Prices in Q1 of 2024-25 is estimated at Rs 43.64 lakh crore, against Rs 40.91 lakh crore in Q1 of 2023-24, showing a growth rate of 6.7%. Nominal GDP or GDP at Current Prices in Q1 of 2024-25 is estimated at Rs 77.31 lakh crore, against Rs 70.50 lakh crore in Q1 of 2023-24, showing a growth rate of 9.7%.

Real GVA in Q1 of 2024-25 is estimated at Rs 40.73 lakh crore, against Rs 38.12 lakh crore in Q1 of 2023-24, showing a growth rate of 6.8%. Nominal GVA in Q1 of 2024-25 is estimated at Rs 70.25 lakh crore, against Rs 63.96 lakh crore in Q1 of 2023-24, showing a growth rate of 9.8%.

Key highlights :
Real GDP has been estimated to grow by 6.7% in Q1 of FY 2024-25 over the growth rate of 8.2% in Q1 of FY 2023- 24. According to official release:
●Nominal GDP has witnessed a growth rate of 9.7% in Q1 of FY 2024-25 as compared to the growth rate of 8.5% in Q1 of FY 2023-24.
●Real GVA has grown by 6.8% in Q1 of FY 2024-25 over the growth rate of 8.3% in Q1 of the previous financial year. This GVA growth in the Q1 of FY 2024-25 has been driven by significant growth in the Secondary Sector (8.4%), comprising of Construction (10.5%), Electricity, Gas, Water Supply & Other Utility Services (10.4%) and Manufacturing (7.0%) sectors.
●Growth rate in Nominal GVA for Q1 of FY 2024-25 have been estimated at 9.8% over 8.2% growth rate in Q1 of FY 2023-24.
●Private Final Consumption Expenditure (PFCE) and Gross Fixed Capital Formation (GFCF), at Constant Prices, have witnessed growth rates of 7.4% and 7.5% respectively in Q1 of FY 2024-25.
●Net Taxes, at Current Prices, has observed the growth rate of 8.0 % in Q1 of FY 2024-25 resulting in 0.1% point gap between the growth rates of GVA and GDP.

The economists had predicted that the economy likely slowed down in the first quarter owing to a slowdown in government spending due to election activity in the first quarter and the adverse impact of heatwaves.

Economists observed that uncertainty surrounding the general elections adversely impacted infrastructure and capital expenditure during the June quarter. However, economic activity is showing signs of recovery. According to real sector indices, the economy remains steady and robust, primarily driven by consumption. Government spending in the June quarter decreased by 7.7% compared to the same period last year, when it had increased by 10.8%. This reduction, coupled with political uncertainty, also affected investment and consumption during the April-June quarter.

Despite this, increased government spending , after a setback in the general election, including a substantial $576 billion annual budget with allocations for affordable housing and rural jobs, is expected to stimulate economic growth. Additionally, favorable rainfall this year is anticipated to boost farm output, rural incomes, and consumer demand, as evidenced by the rise in sales of two-wheelers and tractors in July,noted economists.

Industrial production in the first three months of the year was higher at 5.2 percent compared with 4.7 percent growth between April-June 2024.But capex utilization has been lower with the government utilizing just 16.3 percent of Budget estimates in the June quarter compared with 27.8 percent in the year earlier.

“India witnessed a transient lull in investment activity in Q1FY25. For instance, the capital expenditure of the government of India and 22 state governments (capital outlay and net lending for states, except Arunachal Pradesh, Assam, Goa, Gujarat, Manipur, and Sikkim) recorded a YoY contraction of 35 percent and 23 percent, respectively, in Q1 FY25,” Aditi Nayar, chief economist, Icra reportedly stated in her note prior to the GDP release.

The Indian economy is still likely to grow over 7 percent in FY25 for the fourth consecutive year in a row,believe economists. Moody’s Ratings, on August 29, raised India’s growth estimate upward to 7.2 percent for 2024 compared with 6.8 percent earlier,according to information. Meanwhile, RBI expects the economy to grow 7.2 percent in FY25,stated reports.