India GDP Growth Slowest In 5 Quarters

(RTTNews) - India's economy grew at the slowest pace in five quarters in the three months to June, as a slowdown in farm output, and a slump in government spending offset the gains in manufacturing and private consumption.

Gross domestic product grew 6.7 percent year-on-year following a 7.8 percent increase in the March quarter, preliminary figures from the country's statistical office showed Friday. Economists had forecast 6.9 percent expansion. The latest growth rate was the slowest since the December quarter of 2022, when the economy expanded 6.2 percent. The rate was also less than the Reserve Bank of India's forecast of 7.1 percent.

In the June quarter of 2023, the Indian economy grew 8.2 percent.

Despite the slowing, India's growth rate was the strongest among the fastest growing main economies and surpassed China's 4.7 percent for the June quarter. Farm sector growth slowed to 2.7 percent from 4.2 percent in the same period last year.

The tertiary sector that mainly includes services industries such as hospitality, communication, transport, and financial services, grew 7.2 percent, which was slower than the 10.7 percent expansion seen a year ago.

Manufacturing growth improved to 7.0 percent from 5.0 percent. Growth in the utilities sector surged to 10.4 percent from 3.2 percent. Construction sector expanded 10.5 percent, an improvement over the 8.6 percent gain last year. Private consumption grew 7.4 percent and gross fixed capital formation was 7.5 percent higher.

However, government spending shrank 0.2 percent, mainly due to curbs ahead of the parliamentary election.

"Looking ahead, we expect the economy to cool a bit further over the coming quarters as household consumption moderates and investment growth eases in an environment of still-high interest rates," Capital Economics economist Ankita Amajuri said.

"But the economy is not going to crater."

The economy is still on track to grow by 6.5 percent this year and 6.0 percent in 2025, the economist said.

Further, Amajuri said the June quarter data is unlikely to convince the RBI to lower interest rates at its October meeting, but policymakers will feel justified in doing so by December when there is enough evidence that headline inflation is sustainably back at the 4 percent target.

The RBI has forecast 7.2 percent growth and 4.5 percent inflation for the financial year 2024-25.