India’s GDP expected to contract below 6.5% in FY25 amid slowdown in GDP growth in second quarter: SBI
India’s Gross Domestic Product (GDP) is expected to fall below 6.5 percent in the current fiscal year 2025, as GDP growth in the second quarter (Q2 FY25) slowed to 5.4 percent, according to a report by the State Bank of India ( SBI ).
The report revealed that real GDP growth in the first quarter (H1 FY25) stood at 6.0 percent, with a forecast growth of 6.5-6.8 percent in the second quarter (H2).
According to the report, the manufacturing-led recession has had a significant impact on the performance of the economy as a whole. Industrial sector growth slowed to a six-quarter low of 3.6 percent in Q2, contributing to lower GDP figures.
It said, “With real GDP growth of 6.0 percent in H1 FY25, overall gross domestic product growth will be below 6.5% (assuming growth of 6.5-6.8% in H2). This decline in productivity gives a clear reading compared to the non- .-unexpected debt growth”.
The report said cumulative growth in the industrial sector was Rs 42,515 crore in Q2 FY25 as against Rs 1.4 lakh crore in the corresponding period of the previous year, marking a decline of about Rs 1 lakh crore in incremental terms.
It added, “After 7 quarters, GDP growth slowed to below 6.0 percent in Q2 FY25 due to 3.6 percent growth in the industrial sector”.
Despite some strength in some sectors, industrial efficiency is a heavy burden on the economy.
The services sector grew by 7.1 percent in Q2 FY25, slightly higher than the 6.0 percent in Q2 FY24 but almost flat compared to the 7.2 percent growth in Q1 FY25. The agriculture sector, which has been performing well since the pandemic, grew by 3.5 percent in Q2 (compared to 1.7 percent in Q2 FY24).
However, its contribution to overall growth remained modest, with an estimated contribution of only 40 basis points.
Gross Value Added (GVA) growth in Q2 stood at 5.6 percent, while real GDP grew by 8 percent. It is noteworthy that this is the first time in seven quarters that GDP growth has fallen below 6.0 percent, highlighting the challenges facing the economy.
The report suggested that year-on-year comparisons may provide a skewed narrative and emphasize the focus on incremental growth. While India’s economy has shown resilience in the past, the current slowdown reflects a temporary stagnation in growth, driven by broad sluggishness in the industrial sector.
