GDP growth falters in Q2, hopes pinned on 2nd half

GDP growth of 5.4% was the lowest in nearly two years, lower than estimates

- Rhik Kundu & Nikita Prasad

Two consecutive quarters of disappointing economic growth have left economists pinning their hopes on a rebound in the second half of the fiscal. The expected levers to serve up a glass half full: higher government spending, the ongoing festival season, and robust rural consumption.

These triggers are expected to compensate for a slowdown in manufacturing and urban consumption, and disappointing corporate earnings, which pulled down India's gross domestic product (GDP) growth in the September quarter to 5.4%, data released by the ministry of statistics and programme implementation (MOSPI) on Friday showed.

This was the slowest in nearly two years, and lower than economists' estimates. A Mint poll of 25 economists had predicted 6.5% growth for Q2. In the first quarter, India's GDP growth was 6.7%, and 8.2% in the year-ago period.

Conversely, India's core sector growth, measured by the Index of Industrial Production (IIP), improved to 3.1% in October, according to data released by the commerce ministry, also on Friday. This marks the second consecutive month of recovery after a revised 2.4% growth in September.

To be sure, India remains one of the world's fastest-growing major economies. The Union finance ministry, too, in its latest economic review forecast a rebound in the second half of 2024-25 driven by stronger rural demand and increased government spending.