Growth to Slow to Six-Quarter Low of 6%: ICRA

Introduction

India's GDP growth is projected to decelerate to 6% in the June quarter of 2024, marking the slowest expansion in six quarters, according to a recent ICRA report. This moderation is driven by reduced government capital expenditure and weakening urban consumer confidence.

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Comparative Performance

This 6% growth contrasts with the 7.8% recorded in the March quarter and the 8.2% achieved in FY24. The Reserve Bank of India (RBI) has forecast 7.2% growth for FY25, indicating that this slowdown may be temporary.

Sectoral Impact

Gross Value Added (GVA) growth is expected to ease to 5.7% in the June quarter, down from 6.3% in March. The industrial sector is projected to grow at 6.4%, a significant drop from 8.4% in the previous quarter. The services sector is also expected to see a slight reduction, with growth estimated at 6.5%, down from 6.7%.

Agriculture: A Slight Uptick

The agricultural sector is expected to see a minor improvement, with GVA growth rising to 1% from 0.6% in the previous quarter. However, this uptick is not enough to counterbalance the overall slowdown.

Key Drivers of Slowdown

ICRA attributes the slowdown to the parliamentary elections and sluggish government spending, which dampened activity in several sectors. Urban consumer confidence also declined, as reflected in RBI’s surveys from May and July 2024. Additionally, last year’s unfavorablemonsoon and a slow start to the 2024 monsoon season further weakened rural sentiment.

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Impact on Industries and Services

The combination of lower volume growth and diminishing gains from commodity prices hurt industrial profitability, while a heatwave reduced footfalls in the service sector, despite increasing electricity demand.

Conclusion: A Temporary Setback

While the June quarter shows a temporary dip in GDP and GVA growth, the economic outlook remains cautiously optimistic. Key indicators like public spending, transport, communication, and exports improved on an annual basis, suggesting a potential recovery in the coming months.

 Also Read:India’s Pulse Imports to Decline in FY25 Amidst Increased Domestic Production