India’s economy clocked a GDP growth rate of 5.4% for the second quarter (July-September) of the current financial year, according to the data released by the Ministry of Statistics on Friday.

The sluggish growth observed in Manufacturing (2.2%) and Mining &Quarrying (-0.1%) sectors in Q2 of FY 2024-25, real gross value added (GVA) in H1 (April-September) has recorded a growth rate of 6.2%.

The agriculture and allied sector has bounced back by registering a growth rate of 3.5% in Q2 of FY 2024-25 after sub-optimal growth rates ranging from 0.4% to 2% observed during previous four quarters.

In the construction sector, sustained domestic consumption of finished steel has resulted in 7.7% and 9.1% growth rates respectively in Q2 and H1 of FY 2024-25, according to the official statement.

The tertiary sector clocked a growth rate of 7.1% in Q2 of FY 2024-25, as compared to the growth rate of 6% in Q2 of the previous financial year.

In particular, Trade, Hotels, Transport, Communication & Services related to Broadcasting has seen a growth rate of 6% in Q2 of FY 2024-25 over the growth rate of 4.5% in Q2, 2023-24.

A positive feature observed in the Private Final Consumption Expenditure has witnessed a growth rate of 6% and 6.7% respectively in Q2 and H1 of the FY 2024-25 over the growth rate of 2.6% and 4% in Q2 and H1 of the previous financial year.

Private consumption accounts for 60% of the country's GDP and the acceleration in the growth rate augurs well for the future.

Government Final Consumption Expenditure has also rebounded to a growth rate of 4.4% after having slowed in the previous quarter due to the Lok Sabha elections.

India’s economic growth slowed to 6.7% year-on-year in the April-June quarter as a decline in government spending during national elections weighed, data showed on Friday.

The rise in gross domestic product was less than 7.8% growth in the previous quarter.

Still, it was faster than 4.7% growth in China, Asia's biggest economy, in April-June, and India's slowdown is expected to be temporary as economists forecast that easing inflation and a pickup in government spending will shore up growth in the coming months.

The Gross Value Added (GVA), seen by economists as a more stable measure of growth, increased by 6.8% in April-June from a year earlier, compared to 6.3% in the previous quarter.

Consumer spending, which constitutes about 60% of GDP, rose to a seven-quarter high of 7.4% in April-June from a year earlier, compared to 4% in the previous quarter. Capital investments also rose by 7.4% compared to 6.5% in the previous quarter.

Looking ahead, food inflation will ease while the growth outlook for the economy is "cautiously optimistic" for the coming months as the agricultural sector is likely to benefit from favourable monsoon conditions, increased minimum support prices and adequate supply of inputs, according to the Finance Ministry’s monthly economic review released this week.

Amid a clouded global background, and after a brief period of softening momentum over the monsoon months, many high-frequency indicators of economic activity in India have shown a rebound in October. These include indicators of rural and urban demand and supply side variables like Purchasing Managers’ Index and E-way bill generation, the report states.

On the employment front, the formal workforce is expanding, with notable increases in manufacturing jobs and a strong inflow of youth into organised sectors, it added.

The Reserve Bank of India (RBI) has maintained its GDP growth forecast for the current fiscal year at 7.2%.

India’s growth story remains intact as its fundamental drivers – consumption and investment demand – are gaining momentum. Prospects of private consumption, the mainstay of aggregate demand, look bright on the back of improved agricultural outlook and rural demand.

“Sustained buoyancy in services would also support urban demand. Government expenditure of the Centre and the states is expected to pick up pace in line with the Budget Estimates. Investment activity would benefit from consumer and business optimism, the government's continued thrust on capex and healthy balance sheets of banks and corporates,” RBI Governor Shaktikanta Das said while presenting the monetary policy review last month.

(With inputs from Syndicated feed)

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