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India's economic growth experienced a significant deceleration in the July-September quarter (Q2) of fiscal year 2024 (FY2024), according to official government data released on Friday. The growth rate slumped to 5.4%, representing the slowest pace in nearly two years. This marks a considerable downturn from the 8.1% growth observed in the same period of the previous fiscal year. While this represents a substantial slowdown, it's crucial to note that India still maintained its position as the fastest-growing major economy globally, outpacing China's 4.6% GDP growth during the same quarter. The last time India's GDP growth fell below this level was in the October-December quarter of FY2023, when it registered a mere 4.3%. This recent slowdown raises concerns among economists and policymakers about the overall health of the Indian economy and its future trajectory.
A detailed sectoral analysis reveals a mixed picture. The agriculture sector demonstrated robust growth, with a Gross Value Added (GVA) of 3.5% in Q2 FY2024, a significant improvement from the 1.7% recorded in the corresponding quarter of the previous year. This positive performance in the agricultural sector contrasts sharply with the performance of the manufacturing sector. The manufacturing sector's GVA growth plummeted to a mere 2.2% in Q2 FY2024, representing a dramatic fall from the robust 14.3% growth seen in the same period last year. This sharp decline in manufacturing activity is identified as the primary factor contributing to the overall economic slowdown. The contraction in manufacturing activity raises concerns about the potential for sustained economic recovery in the face of ongoing global economic headwinds, particularly given the manufacturing sector's crucial role in driving overall economic growth and job creation in India.
Considering the performance across the first half of FY2024 (April-September), India's GDP growth stood at 6%, a decline from the 8.2% achieved during the same period in FY2023. However, the GDP growth for the first quarter (April-June 2024) remained unchanged from earlier estimates, confirmed at 6.7%. The contrasting performance between the first and second quarters highlights the uneven nature of economic growth in India during the first half of FY2024. The significant deceleration in the second quarter necessitates a thorough investigation into the underlying causes to inform appropriate policy interventions. Factors contributing to the slowdown warrant detailed analysis, encompassing both domestic and global influences. This analysis needs to consider several factors, including inflation, monetary policy, global demand, supply chain disruptions, and geopolitical uncertainties. Addressing these underlying challenges is vital to restoring robust and sustainable economic growth in India.
The slowdown in India's economic growth underscores the complexities of managing an economy in a dynamic global landscape. While India retains its status as the fastest-growing major economy, the 5.4% growth rate in Q2 FY2024 signals a need for proactive measures to address the challenges facing the manufacturing sector and to maintain a trajectory of sustainable economic development. The government and the Reserve Bank of India will likely need to carefully evaluate policy options to stimulate economic growth while mitigating inflationary pressures. This might involve a nuanced approach that considers fiscal and monetary policy adjustments, targeted support for specific industries, and investments in infrastructure development. Further analysis of the data is needed to fully understand the causes of the slowdown and to develop appropriate responses to ensure continued economic progress in the coming quarters.
The contrasting performance between the agriculture and manufacturing sectors highlights the need for a diversified and resilient economy. While the agricultural sector demonstrated impressive growth, the sharp contraction in manufacturing underscores the vulnerability of the Indian economy to global economic headwinds and the need to promote diversification and innovation within the manufacturing sector. This might involve promoting technological advancements, fostering entrepreneurship, and improving infrastructure to enhance the competitiveness of Indian manufacturing industries in the global market. Moreover, the government needs to address supply-side bottlenecks and streamline regulatory processes to facilitate investment and growth in the manufacturing sector. A comprehensive strategy that addresses both domestic and global factors is necessary to ensure the sustained growth of the Indian economy.
Source: Economic growth slows to 6 pc in April-September 2024: Govt data