India’s GDP growth slows to 5.4% in Q2 FY25 due to weak consumption.

India’s GDP growth slowed to 5.4% in Q2 FY25, down from 8.1% in the same period last year and 6.7% in the previous quarter, as per government data. Economists had forecasted growth of 6.5%, lower than the RBI’s 7% estimate.

Sector-wise, Real Gross Value Added (GVA) grew by 5.6%, down from 7.7% last year. Key drivers like Private Final Consumption Expenditure (PFCE) rose 6%, while government spending (GFCE) grew 4.4%. The manufacturing sector grew slowly at 2.2%, while agriculture bounced back with 3.5% growth. Construction saw strong growth at 7.7%, and services expanded by 7.1%.

Economic challenges include rising inflation, with food prices hitting 10.87%, and weak corporate earnings. Urban consumption remained sluggish due to high borrowing costs, while rural demand showed signs of recovery. The RBI maintained its FY25 growth forecast at 7.2%, with an unchanged repo rate of 6.50%. Experts expect gradual recovery later in FY25, fueled by increased government spending and improved rural demand.