India’s GDP growth slows to 6.7% in April-June quarter

India’s gross domestic product (GDP) grew 6.7% year-on-year (y-o-y) in the April-June quarter, the slowest pace in five quarters, government data showed.

The pace of expansion during the quarter was down from the 7.8% growth rate clocked in the previous January-March quarter and the 8.2% growth seen in the year-ago period.

The rate of economic expansion during the quarter is also below the Reserve Bank of India’s (RBI’s) forecast of 7.1%.

RBI had revised its forecast for the fiscal first quarter downwards by 20 basis points to 7.1% in its August monetary policy statement, citing muted government capex, lower corporate profitability, and lower core output. One basis point is one-hundredth of a percentage point.

A Reuters poll of 52 economists had projected GDP growth of 6.9% for the three months through June.

Despite the slower growth, India remains the fastest-growing major economy in the world as China clocked a GDP growth of 4.7% in the same quarter.

What sectors rose and which ones fell?

Agriculture growth slowed to 2% in the April-June quarter against 3.7% in the year-ago quarter, while manufacturing grew at 7% during the quarter, higher than the 5.9% rate a year ago.

Economic growth during the quarter was also weighed down by a decline in government expenditure amid the general election as government consumption fell about 0.2%

The construction sector expanded in the double digits at 10.5% against 8.6% a year ago, the data released by the National Statistical Office under the ministry of statistics and program implementation showed.

Growth in private consumption accelerated during the quarter, the data showed. Private final consumption expenditure and gross fixed capital formation at constant prices grew 7.4% and 7.5%, respectively, in the quarter.

Meanwhile, Moody’s had on Thursday raised its real GDP growth forecast for India to a robust 7.2% in 2024, up from its earlier 6.8% projection. The upward revision reflects strong, broad-based growth, driven by resilient private consumption and improved business conditions, it said.

Similarly, ratings agency Fitch Ratings had affirmed India’s rating at ‘BBB-‘ with a stable outlook based on its robust medium-term growth outlook.

Strengthening fiscal credibility, enhanced transparency and buoyant revenues have increased the likelihood that government debt can follow a modest downward trend in the medium term, the ratings firm said.

Meanwhile, a bountiful monsoon this year is expected to spur the rural economy, leading to better economic growth prospects in the coming quarters.

“A good monsoon will give a further fillip to rural and therefore overall consumption,” chief economic adviser V. Anantha Nageswaran said in New Delhi on Friday.

Sowing of the kharif crop is also progressing steadily. On a yearly basis, the sowing is about 1.93% higher, according to the latest data from Agriculture Ministry released on Tuesday.

Core sector grows 6.1% in July

India’s core sector, meanwhile, grew by 6.1% in July compared with a year ago, provisional government data showed.

The Index of Eight Core Industries (ICI) measures the combined and individual performance of production of eight core industries: cement, coal, crude oil, electricity, fertilizers, natural gas, refinery products and steel.

Of these, steel, electricity, coal, refinery products, cement, and fertilizers sectors grew while crude oil and natural gas sectors contracted.

The eight core industries comprise 40.27% of the weight of items included in the Index of Industrial Production (IIP).