India reports 5.4% GDP growth in Q2, retains position as fastest-growing major economy outpacing China

India remains the fastest-growing major economy

India’s economy grew by 5.4% in the second quarter (July-September) of the 2024-25 financial year, according to data released by the Ministry of Statistics on Friday.

While this marks a slowdown compared to the previous quarter, India continues to be the world’s fastest-growing major economy, outpacing China, which recorded a growth rate of 4.6% for the same period.

Despite weaker performance in sectors like Manufacturing (2.2%) and Mining & Quarrying (-0.1%), India has seen a solid overall performance, with real gross value added (GVA) rising by 6.2% in the first half of the year (April-September).

Agriculture has shown a notable recovery, registering a growth rate of 3.5% in Q2 after lackluster growth in recent quarters. The construction sector also performed well, with domestic steel consumption contributing to growth rates of 7.7% in Q2 and 9.1% in H1 of FY 2024-25.

The services sector remained strong, growing by 7.1% in Q2, up from 6% in the same quarter last year. Within this, trade, hotels, transport, communication, and broadcasting services saw a notable 6% growth, compared to 4.5% a year earlier.

Private Final Consumption Expenditure (PFCE), a key indicator of economic health, grew by 6% in Q2 and 6.7% in H1 of FY 2024-25. This is a significant improvement from the previous year’s growth rates of 2.6% and 4%, respectively. With private consumption accounting for 60% of India’s GDP, this acceleration is a promising sign for the future.

Government Final Consumption Expenditure (GFCE) also showed signs of recovery, increasing by 4.4% after a slowdown during the Lok Sabha elections earlier this year.

While India’s GDP growth slowed to 6.7% in the April-June quarter, down from 7.8% in the previous quarter, it remains ahead of China, where growth was 4.7%. Economists forecast that easing inflation and an uptick in government spending will support continued growth in the months ahead.

The finance ministry’s recent economic review also expressed a cautiously optimistic outlook, noting that India’s agricultural sector is likely to benefit from favorable monsoon conditions and higher minimum support prices. High-frequency indicators from October, such as rural and urban demand, the Purchasing Managers’ Index, and E-way bill generation, point to a rebound in economic activity.

The Reserve Bank of India (RBI) has maintained its GDP growth forecast for the current fiscal year at 7.2%.

RBI Governor Shaktikanta Das highlighted that India’s growth remains resilient, driven by strong consumption and investment demand. He also emphasized the continued government focus on capital expenditure (capex) and the healthy financial conditions of both banks and corporates, which are expected to support investment activity in the coming months.

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