India’s Q2 GDP slows to 5.4%, hits 18-month low on weak consumption

India’s GDP growth for the July-September quarter fell sharply to 5.4%, marking an 18-month low, as per data released by the National Statistics Office (NSO) on Friday. The figure was significantly below the Reuters poll estimate of 6.5% and reflected a steep decline from 6.7% in the April-June quarter and 8.1% in the same period last year.
Gross Value Added (GVA), which measures economic activity across sectors, expanded by 5.6%, also missing the forecast of 6.5%. This was a notable slowdown from 7.7% growth year-on-year and 6.8% in the previous quarter.
Sectoral performance during the quarter presented a mixed picture. Agriculture posted growth of 3.5%, recovering from 2% in the previous quarter and 1.7% a year earlier. However, the mining sector contracted by -0.1%, a sharp reversal from 11.1% growth year-on-year and 7.2% in Q1FY25.
Manufacturing growth decelerated significantly to 2.2%, compared to 14.3% in the same quarter last year and 7% in the previous quarter. The electricity segment slowed to 3.3% from 10.5% year-on-year and 10.4% sequentially.
Construction, a key driver of economic activity, recorded 7.7% growth, lower than the 13.6% growth a year ago and 10.5% in Q1FY25. Trade, hotels, and transport improved marginally to 6% growth compared to 4.5% year-on-year and 5.7% sequentially.
Financial, real estate, and professional services grew by 6.7%, a slight improvement from 6.2% a year earlier but below the 7.1% recorded in the previous quarter. Public administration and other services, which include government spending, grew by 9.2%, up from 7.7% last year but slightly lower than 9.5% in Q1FY25.
The weaker-than-expected GDP growth raises concerns about the sustainability of economic recovery, particularly as key sectors like manufacturing and mining face challenges.
Analysts suggest that while agriculture and public spending provided some support, the overall momentum in private consumption and industrial output remains subdued.
Sujan Hajra, Chief Economist & Executive Director, Anand Rathi Shares and Stock Brokers, said, “India’s GDP growth in Q2 stood at 5.4%, falling below our projection of 6.7% and the street’s estimate of 6.5%. This weakness in the numbers was largely due to discrepancies; net of these, GDP growth remained at a healthy 7.5%.”
“While we are not revising our full-year growth projection of 7% thus implying a 7.9% growth in H2, we will closely monitor the momentum going forward. We believe that growth in the second half (H2) will be driven by continued strength in agriculture, which is expected to boost rural demand further and increase in capital expenditure (capex) from both central and state governments,” he added.