India’s economic growth, while slowing, has cemented its position as the world’s fastest-growing major economy. Official data released Friday revealed a growth rate of 5.4% for the July-September 2023 quarter, marking a near two-year low. This is significantly lower than the robust 8.1% growth recorded during the same period last year. The deceleration is primarily attributed to a significant weakening in the manufacturing sector, which saw a dramatic drop from 14.3% growth in the previous year to a mere 2.2% in the second quarter of the current fiscal year (2024-25).
Despite this slowdown, India’s growth surpasses that of China, whose GDP expanded by only 4.6% in the July-September quarter. This further solidifies India’s standing as the leading major economy in terms of growth. The previous low point for India’s GDP growth was 4.3% in the October-December 2022 quarter. The overall growth for the first half of the current fiscal year (April-September 2024) stands at 6%, compared to 8.2% in the same period of the previous fiscal year. The first quarter (April-June 2024) maintained a growth rate of 6.7%.
Looking at the sectoral breakdown, the agricultural sector showed a positive trend. The Gross Value Added (GVA) for agriculture accelerated to 3.5% in the July-September quarter, up from 1.7% a year ago. This indicates some resilience within the Indian economy despite the overall slowdown. The contrast between the agricultural sector’s growth and the significant decline in the manufacturing sector highlights the need for policy interventions to address the challenges facing the manufacturing industry.
Analysts will be closely scrutinizing the factors contributing to this manufacturing sector slowdown. Possible explanations could range from global economic headwinds to domestic policy challenges. The coming months will be crucial in understanding the sustainability of India’s economic growth and the government’s ability to address the specific issues impacting the manufacturing sector. Continued strong performance in other sectors, such as agriculture, will be vital in maintaining India’s overall economic trajectory.
