The Indian economy expanded by 6.7 per cent in the first quarter of the financial year 2024-25, missing the Reserve Bank of India’s forecast of seven per cent by 40 basis points. Though the growth rate is the lowest quarterly growth in the last five quarters, chief economic adviser V. Anantha Nageshwaran sought to allay the fears of a potential slowdown by stating that the growth number was within the forecast range.
The main factors for the relative slowdown in the economic growth were poor agricultural production due to the heatwave and lower government spending in the election year. The output of agriculture, livestock, forestry and fishing reported a 2.7 per cent increase in the first quarter of the financial year 2024-25 compared to the 4.2 per cent in the corresponding quarter last year. Financial services, real estate and professional services put up a relatively subdued performance in the quarter, resulting in a 2.6 per cent lower growth rate than the yearago quarter.
Government expenditure, which has been providing a backstop for economic growth for a long time, declined marginally to 9.5 per cent of the Gross Domestic Product (GDP) compared to 10.2 per cent in the Q1FY25.
On the positive front, the private consumption that has been the key driver for the Indian economy improved by contributing 56.3 per cent of the overall consumption, which is marginally better than 55.9 per cent recorded in the year-ago quarter. Construction, electricity and manufacturing remained strong contributors to the economy with 11.6 per cent, 8.4 per cent and 7.9 per cent growth rates respectively, debunking any premature fears of a generalised slowdown in the economy.
Nevertheless, the economic growth data highlights the need to examine the factors that contributed to the sagging growth rates in agriculture and financial services sectors, especially to arrest rural and urban indebtedness before they assume unmanageable proportions.
