India’s Q1 GDP Growth Slows to 6.7%, Lowest in 5 Quarters

India’s economic growth moderated to 6.7% in the first quarter (Q1) of FY25, marking the slowest pace in five consecutive quarters. This figure, released by the government on August 30, 2024, is lower than the 7.8% growth recorded in the previous quarter and the 8.2% growth seen in Q1FY24.

While aligning with expert estimations, the growth falls short of the Reserve Bank of India’s (RBI) projection of 7.2% for Q1FY25. Analysts attribute the slowdown to factors like reduced government spending, possibly influenced by elections, and the impact of heatwaves during the quarter.

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Despite the deceleration, the industrial sector witnessed a modest rise with a growth rate of 5.2% compared to 4.7% in the April-June period of 2024. However, a significant decline was observed in capital expenditure utilization. The government spent only 16.3% of its Q1FY25 budgetary estimates, significantly lower than 27.8% in the corresponding period last year.

Aditi Nayar, Chief Economist at Icra, pointed out a notable decrease in investment activity during Q1FY25. Capital expenditure by the central government and 22 state governments contracted by 35% and 23% year-on-year, respectively.

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Looking ahead, India’s economy is still projected to maintain a growth rate exceeding 7% for the fourth year in a row. Moody’s Ratings recently revised India’s growth forecast for 2024 upwards to 7.2%, up from 6.8%. Similarly, the RBI maintains its 7.2% growth projection for FY25.

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