India’s GDP Growth Slumped To 5.4% in Q2FY25: All You Need To Know

India’s GDP growth for the July-September quarter (Q2FY25) dropped sharply to 5.4%, marking the lowest growth rate since Q3FY23. This is a significant slowdown compared to the 8.1% recorded in the same period last year and 6.7% in the previous quarter (April-June 2024), as per data released by the National Statistics Office on Friday.

GVA Growth Below Expectations

Gross Value Added (GVA) in the economy grew at 5.6% during Q2FY25. This figure is lower than the 7.7% growth recorded in the same quarter last year and 6.8% in Q1FY25, signalling a weaker economic performance.

Private and Government Consumption Trends

Private final consumption expenditure (PFCE) grew at 6% in Q2FY25, showing a recovery from the 2.6% growth in the same quarter last year, though it was below the 7.4% growth recorded in Q1FY25. In contrast, government final consumption expenditure (GFCE) slowed to 4.4%, significantly lower than the 14% growth in Q2FY24, though it rebounded from a slight contraction of -0.2% in the previous quarter.

Investment Activity Weakens

Gross fixed capital formation, an indicator of investment activity, grew at 5.4% in Q2FY25, marking a sharp slowdown from the 11.6% growth seen in Q2FY24 and 7.5% in Q1FY25. This decline reflects weakening investment sentiment.

External Trade Performance

External trade made a modest contribution to growth, with exports growing by 2.8% in Q2FY25. This is a slowdown from the 5% year-on-year growth and 8.7% sequential growth in Q1FY25, indicating cooling external demand.

Mixed Sectoral Performance

• Agriculture: Agriculture growth improved to 3.5% in Q2FY25, up from 1.7% year-on-year and 2% in Q1FY25, reflecting better performance in the sector.
• Mining: Mining growth contracted by 0.1%, a stark contrast to the strong 11.1% growth recorded last year and 7.2% sequentially.
• Manufacturing: Manufacturing growth slowed significantly to 2.2%, down from 14.3% in Q2FY24 and 7% in Q1FY25, indicating a significant slowdown in industrial activity.
• Electricity: The electricity sector grew by 3.3%, a slowdown from 10.5% year-on-year and 10.4% in the previous quarter.
• Construction: The construction sector grew by 7.7%, a deceleration from 13.6% in Q2FY24 and 10.5% in Q1FY25.

Growth in Trade, Transport, and Services

• Trade, Hotels, and Transport: This sector grew by 6%, showing an improvement from 4.5% year-on-year and 5.7% quarter-on-quarter.
• Financial and Real Estate Services: Growth in this sector was modest at 6.7%, slightly above the 6.2% year-on-year growth but lower than the 7.1% growth in the previous quarter.
• Public Administration and Other Services: This sector grew by 9.2%, an improvement from 7.7% year-on-year, though marginally lower than the 9.5% growth recorded in the prior quarter.

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