India’s Q2FY25 GDP growth slowed to a seven-quarter low of 5.4% YoY, down from 6.7% YoY in the previous quarter. The figure was significantly below market expectations. Nominal GDP growth fell to 8.0% YoY from 9.7% in the previous quarter.

Real Gross Value Added (GVA) declined to 5.6% YoY from 6.8% in the previous quarter, primarily due to a slowdown in manufacturing activity. The services sector performed better. Agricultural growth also rebounded to 3.5% YoY due to a strong kharif crop season in 2024.

Manufacturing growth slowed to 2.2% YoY in Q2 from 7.0% YoY in the previous quarter. This moderation can be attributed to a fall in the operating profit growth of listed manufacturers and weaker IIP manufacturing.

The mining sector contracted by 0.1% YoY in Q2 compared to the 7.2% YoY growth recorded in Q1. Electricity also slowed down considerably to 3.3% YoY from 10.4% during the same period.

Services sector growth remained healthy at 7.1% YoY, although lower than the 7.7% YoY growth recorded in the previous quarter. Growth in the construction sector slowed to 7.7% from 10.5% in Q1 due to muted growth in cement production and a decline in steel consumption.

On the expenditure side, private consumption growth slowed to 6.0% YoY in Q2FY25 from 7.4% in Q1, possibly due to weaker urban consumption. Fixed investment growth also disappointed at 5.4% YoY, down from 7.5% in the previous quarter.

We expect FY25 GDP growth to be around 6.5-6.8% YoY, with restrictive domestic monetary policy and financial market volatility posing downside risks to the outlook.

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