NEW DELHI: The country’s Gross Domestic Product (GDP) growth rate hit a 15-month low of 6.7 per cent in the first quarter of fiscal year 2024-25, a notable decline from the 8.2 per cent growth recorded in the same period last year, as predicted by some economists.
The Union Government’s data, released on Friday, August 30, attributes this slowdown primarily to weaker performances in the agriculture and service sectors.
Despite this, India maintained its position as the fastest-growing major economy, with China trailing behind with a growth rate of 4.7 per cent for the same period.
The previous low of 6.2 per cent was observed in the January-March quarter of 2023.
Gross Value Added growth
Aditi Nayar, Chief Economist and Head of Research & Outreach at ICRA, commented on the figures, noting that while GDP growth slowed to 6.7 per cent in Q1 FY2025 from 7.8 per cent in Q4 FY2024, Gross Value Added (GVA) growth surprisingly accelerated to 6.8 per cent from 6.3 per cent over the same period.
She attributed this divergence to the normalisation of net indirect tax growth and emphasized that the GDP slowdown should not be cause for alarm.
Data from the National Statistical Office (NSO) highlighted that the GVA growth in the agriculture sector slowed significantly to 2 per cent from 3.7 per cent in the April-June quarter of 2023-24. Similarly, the GVA for ‘financial, real estate, and professional services’ also decelerated, dropping to 7.1 per cent from 12.6 per cent in the same period last year.
Manufacturing sector up
Conversely, the manufacturing sector’s GVA accelerated to 7 per cent in Q1 FY2025, up from 5 per cent a year earlier.
The electricity, gas, water supply, and other utility services sectors also saw substantial growth, increasing by 10.4 per cent from 3.2 per cent.
The construction sector showed strong performance as well, with growth rising to 10.5 per cent from 8.6 per cent in the previous year.
Trade, hotels down
However, trade, hotels, transport, communication, and services related to broadcasting experienced a slowdown, with growth falling to 5.6 per cent from 9.7 per cent a year ago.
Nayar pointed out that the higher-than-expected GVA growth in Q1 FY2025, particularly in the construction, public administration, defense, and agriculture sectors, was surprising given the slowdown in related indicators like cement and steel output, as well as a sharp contraction in capital expenditure by the central and state governments.
The public administration, defense, and other services sectors grew by 9.5 per cent, up from 8.3 per cent in the same quarter last year.
In terms of real GVA, Q1 of 2024-25 is estimated at Rs40.73 lakh crore, reflecting a growth rate of 6.8 per cent compared to 8.3 per cent in the corresponding quarter of 2023-24.
Nominal GVA for the same period is estimated at Rs70.25 lakh crore, showing a growth rate of 9.8 per cent compared to 8.2 per cent a year ago.
