India GDP Growth Slowest In 7 Quarters On Weak Manufacturing

(RTTNews) - The Indian economy expanded at the slowest pace in seven quarters during the three months to September as the stronger performance of the services sector was offset by the sluggishness in manufacturing and mining industries, preliminary data from the statistics ministry showed on Friday.

Gross domestic product grew 5.4 percent year-on-year in the September quarter of the financial year 2024-25 following a 6.7 percent increase in the previous three months. Economists had forecast 6.5 percent expansion.

The growth pace slowed for a third quarter in a row. The latest rate of growth was the weakest since the December quarter of the fiscal year 2022-23, when the economy expanded 4.3 percent.

In the September quarter of 2023-24, the India's economic growth rate was 8.1 percent. Despite the recent slowing in growth, India remained the fastest growing emerging economy, outpacing China that logged a 4.6 percent expansion the September quarter. Manufacturing grew 2.2 percent which was much weaker than the double-digit growth in the same period in the previous year. The mining and quarrying output shrunk 0.1 percent versus 11 percent expansion in the same quarter last year.

The tertiary sector that includes the hospitality, travel, communication and broadcasting industries among others grew 7.1 percent versus 6.0 percent in the same quarter a year ago. Growth in the financial services sector strengthened to 6.7 percent from 6.2 percent.

Construction grew 7.7 percent, led by sustained domestic consumption of finished steel, the report said. That compared to 13.6 percent growth in the previous year.

The farm sector growth improved to 3.5 percent from 1.7 percent in the previous year. Utilities sector growth slowed sharply to 3.3 percent from 10.5 percent.

Private consumption, a crucial component of India's GDP, grew 6.0 percent in the September quarter versus 2.6 percent in the same period last year. State spending rebounded 4.4 percent following negative or weak growth in the previous three quarters, the ministry said.

Economic growth in the April to September period, which is the first half of the financial year 2024-25, was 6.0 percent, which was slower than 8.1 percent increase in the previous six months. In the same period last year, growth was 8.2 percent.

Capital Economics expects India's growth to remain subdued over the coming quarters as household consumption moderates and investment growth eases in an environment of still-high interest rates.

"We don't think the Q3 data will convince the RBI to lower interest rates at its December meeting given that headline inflation has surged over the past few months," Capital Economics economist Harry Chambers said.

"But if we are right in thinking that inflation has now peaked and will gradually retreat back towards the 4 percent target, that should open the door for policy easing to begin in April."