India’s Gross Domestic Product (GDP) growth has decelerated to 5.4% in Q2 FY25, as per a report by the State Bank of India (SBI). The report forecasts overall GDP growth for the financial year 2025 to fall below 6.5%, citing a manufacturing-led slowdown as the primary reason.
Key Insights from the Report
- H1 FY25 Growth: The real GDP growth in the first half of FY25 stood at 6.0%.
- H2 FY25 Projection: GDP growth is expected to range between 6.5% and 6.8% in the second half of FY25.
- Industry Slowdown: Growth in the industry sector dropped to a six-quarter low of 3.6% in Q2, contributing significantly to the decline in GDP growth. Incremental growth in the sector decreased by nearly ₹1 lakh crore compared to the same period last year.
- Services Sector: Showed resilience with 7.1% growth in Q2 FY25, slightly higher than 6.0% in Q2 FY24, but flat compared to Q1 FY25 (7.2%).
- Agriculture Sector: Grew by 3.5% in Q2 FY25, up from 1.7% in Q2 FY24, though its weighted contribution remained modest at 40 basis points.
Decline in GDP Growth
The report highlights that this is the first time in seven quarters that India’s GDP growth has fallen below 6.0%, with Q2 FY25 Gross Value Added (GVA) growth at 5.6% and nominal GDP growth at 8%.
Broader Challenges
The report attributed the slowdown to:
- Manufacturing-Led Decline: Weak industrial performance dragging overall growth.
- Skewed Year-on-Year Comparisons: Emphasizing the need to focus on incremental growth trends.
- Temporary Pause in Growth Story: Broad-based sluggishness in the industrial sector signaling a short-term challenge.
Despite resilience in services and agriculture, the subdued industrial performance has created a drag on the economy, raising concerns about achieving sustained growth in the near term.