India’s GDP Growth Slows to 6.7% in Q1 FY25

New Delhi: India’s economic growth rate dipped to 6.7% in the first quarter of the current financial year (FY25), marking the lowest level in five quarters. This slowdown from the previous quarter’s 7.8% growth rate and the 8.2% figure recorded in Q1 FY24 has raised concerns among economists.

While the 6.7% growth rate aligns with expert predictions, it falls short of the Reserve Bank of India’s (RBI) projected figure of 7.2% for the same period. The deceleration has been attributed to factors such as reduced government spending, likely influenced by election activities and the negative impact of heatwaves during the quarter.

Industrial production witnessed a modest increase, expanding by 5.2% compared to 4.7% in the April-June period of 2024. However, a significant decline in capital expenditure utilisation, with the government spending only 16.3% of its budget estimates in Q1 FY25, is a cause for concern. This marks a substantial drop from the 27.8% spending recorded in the previous year.

Capital expenditure by the central government and 22 state governments experienced year-on-year contractions of 35% and 23%, respectively.

Despite the slowdown, India’s economy is still projected 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% from 6.8%, while the RBI maintains its 7.2% growth forecast for FY25.