India’s GDP grew by 6.7% in the first quarter of fiscal year 2024-25 (April-June) compared to the same period of the previous year. This rate – lower than various forecasts, the Reserve Bank of India had expected a growth of 7.1% – is a sign of a slowdown in economic growth in India. This is indeed the lowest quarterly GDP growth rate in fifteen months. And in the previous quarter (January-March), growth had reached 7.8%.
The various experts questioned on the economic situation had anticipated this slowdown, notably because of the marathon elections of May-June which returned Prime Minister Narendra Modi to power, but also because of the intense heat wave which overwhelmed the north of the country at the same time.
Agriculture and the tertiary sector are losing momentum
Some sectors of the economy have lacked dynamism, such as the primary sector (agriculture and mining), whose growth has fallen from 4.2% in the first quarter of the 2023-2024 financial year to 2.7% in the first three months of the current fiscal year. This is mainly due to rainfall anomalies that have affected agricultural yields. But the government has been reassuring: “The progress of the monsoon will improve the situation,” explained V. Anantha Nageswaran, the government’s chief economist.
The tertiary sector also took a nosedive, recording growth of 7.2%, compared to 10.7% in the same period last year. The slowdown was particularly significant in trade, tourism and communications, where growth plummeted from 9.7% to 5.7%. The high temperatures that overwhelmed the country in the spring are partly to blame.
The finance and real estate sector is also losing momentum, with growth falling from 12.6% to 7.1%. One piece of good news: the secondary sector has regained momentum, with manufacturing growing by 7% compared to only 5% last year.
Experts remain confident
For New Delhi, there is no cause for concern. “India was the fastest growing major economy this quarter,” said V. Anantha Nageswaran. “Despite the slowdown, the data is positive, with a notable increase in private consumption and a slight increase in investments,” said Sujan Hajra, chief economist at brokerage Anand Rathi.
Experts are also confident about the year ahead. “After this soft start, we expect growth to gain ground for the rest of the year, bringing the annual average to 7% during 2024-2025,” reacted Radhika Rao, economist at DBS Bank in Singapore. Moody’s, however, is a little more optimistic. It is counting on growth of 7.2% this year, then 6.6% in 2026. As a reminder, the Indian economy had grown by 8.2% during the 2023-2024 fiscal year.
