India’s GDP Growth Hits Five-Quarter Low Amid Economic Shifts and Challenges

India’s economic growth for the June quarter slowed to 6.7%, marking a five-quarter low, primarily due to a rise in net indirect taxes. The growth fell short of the Reserve Bank of India’s 7.1% prediction and a Reuters poll estimate of 6.9%. Despite this, the gross value added (GVA) showed sequential growth at 6.8%. Agricultural growth was hindered by poor previous monsoons, though sectors like construction and energy saw significant growth. Private consumption reached a six-quarter high, while investment demand also improved. Economists expect overall GDP growth for FY25 to be around 7%, supported by a potential recovery in agriculture and an increase in government spending in the coming months.

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India’s economy grew by 6.7% in the June quarter of 2024, marking its lowest growth rate in five quarters. This decline was primarily attributed to a slower increase in net indirect taxes during the period. The growth fell short of the Reserve Bank of India’s expectation of 7.1% and even below the 6.9% forecasted by a poll of economists from Reuters.

Data released by the National Statistical Office showed that the growth in gross value added (GVA) rose to 6.8% in the June quarter, a slight improvement from 6.3% in the previous quarter. This uptick in GVA was influenced by lower net taxes on products, derived from subtracting subsidies from indirect taxes. As a result, the difference between GVA and GDP growth rates has narrowed significantly, indicating potential challenges ahead.

Economists suggest that the recent drop in GDP growth should not raise immediate concerns. Aditi Nayar, chief economist at ICRA, noted that the slowdown was mainly due to a normalization in tax collections, rather than signs of a broader economic downturn. The agricultural sector continued to struggle with growth at just 2.7%, impacted by last year’s adverse weather conditions. However, sectors like construction and utilities showed promising growth at over 10%.

Despite some mixed signals in private consumption, there are signs of improvement. Private spending hit a six-quarter high, suggesting that families are starting to spend more. With expectations of better agricultural performance and lower food inflation, consumer spending may improve further in the near future.

Overall, while challenges remain, including a dip in manufacturing growth and government expenditure, economists remain cautiously optimistic about future economic growth, predicting GDP to stabilize around 7% for the current financial year.

Tags: India GDP growth, economic update, net indirect taxes, agriculture, private consumption, manufacturing, construction sector

1. What does it mean that India’s GDP growth slowed to 6.7%?
   It means that the economy is growing at a slower rate than before. In this case, the growth is the lowest it’s been in five quarters, which is about one year and three months.

2. Why is the GDP growth important?
   GDP growth shows how fast a country’s economy is expanding. Higher growth generally means more jobs and better living standards for people.

3. What could cause the slowdown in GDP growth?
   Several factors can cause growth to slow down, such as reduced consumer spending, lower exports, or issues in key industries like manufacturing and services.

4. How does a slowing GDP affect everyday people?
   A slower GDP growth can lead to fewer job opportunities, lower wages, and possibly increased prices, affecting how much people can spend on goods and services.

5. What should the government do to improve GDP growth?
   The government can take steps like increasing spending on infrastructure, offering incentives for businesses, and improving policies to encourage investment.