India’s economic growth rate fell to 5.4% in the July-September quarter of 2024, marking a significant slowdown. This decline represents the lowest growth rate in seven quarters for the world’s fastest-growing major economy.
The previous quarter saw a 6.7% growth rate, while the same period last year boasted an 8.1% increase. The manufacturing sector bore the brunt of this slowdown, expanding by only 2.2%.
This sharp decline from the previous quarter’s 7% growth highlights the challenges faced by India’s industrial sector. The mining and extractive industries also struggled, contracting by 0.1% after growing 7.2% in the previous quarter.
Private consumption, a key driver of India’s economy, grew by just 6%. This figure falls short of the 7.4% growth seen in the previous quarter. High food prices have eroded disposable incomes, particularly affecting urban consumption patterns.
The retail food component, which accounts for half of the consumer spending basket, saw a 10.87% year-on-year increase in October. The agricultural sector provided a glimmer of hope, growing by 3.5%.
This improvement comes after four quarters of suboptimal growth ranging from 0.4% to 2.0%. The sector’s recovery may help boost rural demand in the coming months.
India’s Economic Outlook
Despite the overall slowdown, India remains one of the fastest-growing major economies globally. China, for comparison, reported a 4.6% growth rate for the same period.
However, the deceleration raises questions about the sustainability of India’s recent growth momentum. The Reserve Bank of India (RBI) now faces pressure to stimulate growth while managing inflation.
The central bank has maintained its benchmark repo rate at 6.5% since May 2020. Some economists argue for rate cuts to boost demand and investment.
Prime Minister Narendra Modi’s government faces challenges as it strives to meet ambitious growth targets. Rising food prices and unemployment have become key concerns for voters.
The government’s focus on structural reforms and initiatives like “Make in India” aims to drive long-term growth. Looking ahead, India’s Chief Economic Advisor maintains that the overall growth projection of 6.5% for the fiscal year is not in jeopardy.
However, many analysts expect growth to fall below 7%, with several institutions revising their forecasts downward in recent weeks.
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