India's Q1 GDP Growth Slows to 6.7%, Lowest in Five Quarters
Highlights:
- GDP growth drops to 6.7% in Q1 FY25, lowest in five quarters
- Growth lags behind RBI’s 7.2% projection due to reduced government spending
- Despite slowdown, India's economy still on track for over 7% annual growth
News:
India's GDP growth rate for the first quarter of FY25 slowed to 6.7%, marking its lowest level in five quarters, a decrease from 7.8% in the previous quarter. This figure also pales in comparison to the 8.2% growth recorded in Q1 FY24, as per data released by the government on August 30.
While the 6.7% growth aligns with most expert forecasts, it falls short of the Reserve Bank of India's (RBI) projection of 7.2% for the same period. The slowdown is largely attributed to a reduction in government spending, likely influenced by election-related activities and the adverse effects of heatwaves during the quarter.
Industrial production saw a slight increase, growing at 5.2% compared to 4.7% during the same period in 2024. However, capital expenditure utilisation saw a significant decline, with the government spending only 16.3% of its budget estimates in Q1 FY25, down from 27.8% in the previous year.
Aditi Nayar, Chief Economist at Icra, noted a marked reduction in investment activity during Q1 FY25, with capital expenditure by the central government and 22 state governments contracting by 35% and 23% year-on-year, respectively.
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Despite this slowdown, India’s economy is still projected to maintain a growth rate of over 7% for the fourth consecutive year. Moody's Ratings recently revised India's growth forecast for 2024 upward to 7.2%, up from 6.8%, while the RBI continues to hold its growth forecast at 7.2% for FY25.