India’s Q1 GDP Growth Slows To 6.7%, Lowest In Five Quarters

India’s GDP growth slowed to 6.7% in the first quarter of FY25, marking the lowest rate in five quarters. This figure represents a decline from the 7.8% growth seen in the previous quarter and is significantly lower than the 8.2% growth recorded in Q1FY24, according to government data released on August 30.

While the 6.7% growth aligns with most expert predictions, it falls short of the Reserve Bank of India’s (RBI) projected 7.2% for the period. The slowdown has been attributed to reduced government spending, possibly influenced by the focus on election activities and the negative impact of heatwaves during the quarter.

Industrial production showed modest improvement, growing by 5.2%, slightly up from the 4.7% growth in the April-June period of 2024. However, capital expenditure utilisation saw a sharp decline, with the government spending only 16.3% of its budget estimates in Q1FY25, compared to 27.8% in the same quarter last year.

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Aditi Nayar, Chief Economist at Icra, pointed out a significant reduction in investment activity during Q1FY25, noting that capital expenditure by the central government and 22 state governments contracted year-on-year by 35% and 23%, respectively.

Despite the slowdown, India’s economy is still expected to maintain a growth rate of over 7% for the fourth consecutive year. Moody’s Ratings recently revised India’s growth forecast for 2024 upward to 7.2%, up from 6.8%, while the RBI continues to project a 7.2% growth rate for FY25.