GDP hits slow lane, grows at 6.7% in Q1

This divergent trend was led by the normalisation of the growth in net indirect taxes, and the slowdown in the GDP growth is not a cause for alarm, in our view - Aditi Nayar, chief economist at Icra

New Delhi: India’s economic growth slowed to a 15-month low of 6.7 per cent in April-June 2024-25, mainly due to poor performance of the agriculture and services sectors, government data showed on Friday.

The gross domestic product (GDP) expanded by 8.2 per cent in the April-June quarter of 2022-23. India, however, remained the fastest-growing major economy, as China posted a 4.7 per cent growth in April-June 2024. The previous low of 6.2 per cent was recorded in the January-March quarter of 2023.

According to the National Statistical Office (NSO) data, the agriculture sector gross value added (GVA) growth decelerated to 2 per cent from 3.7 per cent in the April-June quarter of 2023-24. The expansion in ‘financial, real estate and professional services’ GVA too slowed to 7.1 per cent from 12.6 per cent in the year-ago quarter. However, the GVA in the manufacturing sector accelerated to 7 per cent in the first quarter of the current fiscal compared to 5 per cent a year ago.

“Real GDP or GDP at Constant Prices in Q1 of 2024-25 is estimated at Rs 43.64 lakh crore against Rs 40.91 lakh crore in Q1 of 2023-24, showing a growth rate of 6.7 per cent,” NSO said in a statement.

It further stated that nominal GDP or GDP at current prices in Q1 of 2024-25 is estimated at Rs 77.31 lakh crore against Rs 70.50 lakh crore in Q1 of 2023-24, showing a growth rate of 9.7 per cent. As per the data, the output (GVA) in the ‘mining and quarrying’ accelerated to 7.2 per cent in the first quarter from 7 per cent a year ago.

Electricity, gas, water supply and other utility services grew by 10.4 per cent from 3.2 per cent. The construction segment also grew by 10.5 per cent from 8.6 per cent a year ago. Trade, hotels, transport, communication and services related to broadcasting slowed to 5.7 per cent from 9.7 per cent a year ago.

“India’s GDP growth expectedly slowed down in Q1 FY2025 relative to Q4 FY2024 (to a five-quarter low of 6.7 per cent from 7.8 per cent), even as the GVA growth surprisingly accelerated between these quarters (to 6.8 per cent from 6.3 per cent).

“This divergent trend was led by the normalisation of the growth in net indirect taxes, and the slowdown in the GDP growth is not a cause for alarm, in our view,” said Aditi Nayar, chief economist and head (research & outreach), at Icra.

Public Administration, defence and other services grew 9.5 per cent, up from 8.3 per cent a year ago. Real GVA (Gross Value Added) in Q1 of 2024-25 is estimated at Rs40.73 lakh crore against Rs38.12 lakh crore in Q1 of 2023-24, showing a growth rate of 6.8 per cent compared to 8.3 per cent in the year-ago period. Nominal GVA in Q1 of 2024-25 is estimated at Rs70.25 lakh crore compared to Rs63.96 lakh crore in Q1 of 2023-24, showing a growth rate of 9.8 per cent over 8.2 per cent a year ago.

“The higher-than-expected growth in the GVA in Q1 FY25, as well as the acceleration in the same vis-a-vis Q4FY24 was largely led by construction, public administration, defence and other services, and agriculture segments. The acceleration in the construction GVA growth, to 11.6 per cent in Q1 FY25 from 8.5 per cent in Q4 FY24, is, particularly, surprising given that the volume growth in construction-related indicators, such as cement and steel output, or infra/construction goods output from the IIP, had slowed between these quarters. Besides, the capex of the Centre and the states had also contracted quite sharply in Q1 FY25,” Nair said.