India's GDP Growth Falls Below 6.5% Amid Manufacturing Slump: SBI Report
Updated: Nov 30, 2024 04:56:09pm
India's GDP Growth Falls Below 6.5% Amid Manufacturing Slump: SBI Report
New Delhi, Nov 30 (KNN) India’s economic growth trajectory has hit a speed bump, with GDP growth in the current fiscal year 2025 projected to fall below 6.5 per cent, according to a report by the State Bank of India (SBI).
The slowdown is attributed primarily to manufacturing sector woes, with GDP growth in the second quarter (Q2 FY25) decelerating to 5.4 per cent, marking the first dip below the 6.0 per cent mark in seven quarters.
The report highlighted that real GDP growth for the first half of FY25 stood at 6.0 per cent, with projections for the second half ranging between 6.5 per cent and 6.8 per cent.
However, SBI cautioned that even under optimistic scenarios, the annual growth rate is likely to remain below 6.5 per cent.
A significant factor in the decline was the manufacturing sector’s poor performance. The industry sector grew by just 3.6 per cent in Q2 FY25, a six-quarter low.
Incremental growth in the sector also fell sharply, adding only Rs 42,515 crore in Q2 FY25 compared to Rs 1.4 lakh crore during the same period last year.
“After seven quarters of robust growth, GDP growth has slipped below 6.0 per cent, primarily due to sluggish industrial output,” the report noted, adding that this slowdown provides a "sketchy" economic reading when paired with non-impulsive credit growth.
The services sector displayed resilience, growing at 7.1 per cent in Q2 FY25, up from 6.0 per cent a year ago, but largely flat compared to the previous quarter’s 7.2 per cent.
The agriculture sector also maintained steady growth at 3.5 per cent, doubling from the 1.7 per cent growth seen in Q2 FY24. However, its contribution to overall GDP growth remained marginal, adding only 40 basis points.
Gross Value Added (GVA) for Q2 FY25 increased by 5.6 per cent, while nominal GDP grew by 8 per cent. Despite these numbers, the manufacturing-led slowdown casts a shadow over India’s economic momentum.
SBI’s report emphasized focusing on incremental growth trends rather than year-on-year comparisons, cautioning against interpreting the slowdown as a structural issue.
It concluded that while India’s economy has historically demonstrated resilience, this industrial slump reflects a temporary pause in its growth narrative.
(KNN Bureau)