India's GDP Grows Slowest In Five Quarters To 6.7% In Q1 FY25, Misses RBI's Estimates

India's gross domestic product (GDP) growth rate comes at 6.7% in the first quarter of FY25, missing RBI's forecast of 7.1% for the said period. Also, GDP numbers missed market estimates of 6.9%. India's economy grew at a slower pace on quarter-on-quarter and year-on-year basis. This is also the lowest growth in 5 quarters.

In the fourth quarter of FY24, India's GDP growth stood at 7.8%, and overall fiscal growth was at 8.2%, making it the best-performing economy among other Western and developed countries. While the economic growth stood at 8.2% in June 2023 quarter.

Meanwhile, nominal GDP witnessed a growth rate of 9.7% in Q1 of FY 2024-25 as compared to the growth rate of 8.5% in Q1 of FY 2023-24.

Further, in Q1FY25, real GVA has grown by 6.8% in Q1 of FY 2024-25 over the growth rate of 8.3% in Q1 of the previous financial year. This GVA growth in the Q1 of FY 2024-25 has been driven by significant growth in the Secondary Sector (8.4%), comprising of Construction (10.5%), Electricity, Gas, Water Supply & Other Utility Services (10.4%) and Manufacturing (7.0%) sectors.

In value terms, real GDP in Q1 of 2024-25 is estimated at Rs 43.64 lakh crore, against Rs 40.91 lakh crore in Q1 of 2023-24, while real GVA is estimated at Rs 40.73 lakh crore, against Rs 38.12 lakh crore in Q1 of 2023-24.

Moreover, Private Final Consumption Expenditure (PFCE) and Gross Fixed Capital Formation (GFCF), at Constant Prices, have witnessed growth rates of 7.4% and 7.5% respectively in Q1 of FY 2024-25.

Additionally, net taxes at current prices, has observed the growth rate of 8.0 % in Q1 of FY 2024-25 resulting in 0.1% point gap between the growth rates of GVA and GDP.

As per Trading Economics, the Indian economy expanded by 6.7% from the previous year in the June quarter of 2024, slowing from the 7.8% increase in the earlier period and missing market expectations of a 6.9% growth rate. It was the slowest expansion in five quarters, owed to a sharp slowdown in government spending as the long-awaited general elections drove several usual government activities to halt. Still, gauges of slowing consumer spending also signaled that the Indian economy is resilient to high interest rates by the RBI to a lesser extent, strengthening the case for doves in the RBI.

In August 2024 policy, RBI has retained its GDP growth forecast of 7.2% for FY25, with quarterly estimates for GDP in 2024-25 being 7.1, 7.2, 7.3 and 7.2 in Q1-Q4, respectively.

The next release of quarterly GDP estimates for the quarter July-September of 2024-25 (Q2 2024-25) will be on November 29, 2024.

According to IMF, GDP measures the monetary value of final goods and services-that is, those that are bought by the final user-produced in a country in a given period of time (say a quarter or a year). It counts all of the output generated within the borders of a country. GDP is composed of goods and services produced for sale in the market and also includes some nonmarket production, such as defence or education services provided by the government.