India’s Q2 GDP growth at 7-quarter low: Sharply lower-than-expected GDP figures reflect highly disappointing corporate earnings figures.
India’s Q2 GDP data has been released.
India’s Q2FY24 GDP Growth The numbers are shocking. Economic growth at a seven-quarter low of 5.4 percent was well below the lowest estimate of 6.2 percent this quarter. The manufacturing sector has been the worst hit. Why was India’s Q2 GDP at such a low level?
Slow urban consumption
Higher food inflation during the July-September quarter weighed on urban spending. Retail food prices, which make up about half of the consumption basket, rose 10.87 percent year-on-year in October, reducing household purchasing power.
“GDP figures for the second quarter of this year reflect the expected increase in consumption in urban areas along with monsoon disruption,” Transport Corporation of India (TCI) managing director Vineet Agarwal said.
Data from the most recent quarter, particularly from the auto and FMCG sectors, fell short of expectations and pointed to a slowdown in urban demand.
Anitha Rangan, economist at Equirus, said a slowdown was anticipated due to weaker government spending, particularly capex, while urban consumption saw a slowdown. “However, this print fell short of expectations.”
Manufacturing a big hit
India’s manufacturing sector has been significantly affected in Q2FY25. It grew just 2.2 percent during the quarter, compared with expectations of about 5 percent and 7 percent growth in the previous quarter and 14.3 percent a year ago.
“The sharper-than-expected GDP figures reflect the extremely disappointing corporate earnings figures. The manufacturing sector seems to have been hit the hardest,” said Upasana Bhardwaj, chief economist at Kotak Mahindra Bank. said
However, it added that high-frequency data suggests that a festival-related pick-up in activity may deliver marginally better 2H growth but overall GDP growth for FY25 around 100bps below the RBI’s estimate of 7.2%. is going to decrease.
“The three sectors that witnessed sub-par growth were manufacturing (2.2%), mining (-0.1%) and power (2.2%),” said Equirus’ Rangan.
Contradictions
“The weakness in the GDP numbers was largely due to their net, GDP growth at 7.5 percent,” said Sujan Hajra, chief economist and executive director at Anand Rathi Shares and Stockbrokers.
India’s Q2 GDP data
India’s gross domestic product (GDP) grew by 5.4% during July-September 2024. India is still the fastest growing economy in the world. Q2 FY25 growth of 5.4 percent fell short of analysts’ expectations, who had projected growth in the range of 6.2 percent to 6.9 percent.
“Real GDP is estimated to grow at 5.4 per cent in the second quarter of FY 2024-25 as against a growth rate of 8.1 per cent in the second quarter of FY 2024-25,” the finance ministry said in a statement. “