GDP Slumps to 5.4% in Sep Quarter; Lowest in Two Years

Gross Domestic Product (GDP) slumped to 5.4% during the July-September quarter, data released by National Statistics Office (NSO) reported on November 29.

While economists predicted a growth of 6.5%, RBI governor Shaktikanta Das estimated a 7% growth for Q2. The figures reported in the September quarter is the lowest since Q23FY23, a 2-year low.

As per NSO, gross value added (GVA) remained at 5.6% in Q2 down from 6.8% in the previous quarter.

Agriculture output presented a merrier picture as it grew by 3.5% on a year-on-year (Y-o-Y) basis as compared to 2% in the Q1. Growth in manufacturing took a huge blow as it slowed down to 2.2% as compared to 7% in Q1 and 14.3% in the same quarter a year ago. Exports largely remained weak, tumbling down at 2.8% as compared to 5% in the same quarter last year. Mining fell by 0.1% as compared to 11% Y-o-Y and 7.2% sequentially.

Experts have highlighted several reasons for the poor performance. Notably, consumer spending largely muted due to surging inflation. Retail food inflation clocked at 10.87% in October. In fact, inflation rose to 6.2%, breaching RBI’s tolerance limit between 2-6%.

Corporate earnings largely remained poor after reporting their weakest quarterly results in four years. Though rural growth has shown some positivity, private consumption remained sluggish on account of high borrowing costs and stagnant real wage growth.