GDP Grows By 6.7 Per Cent, Slowest Growth Rate In Five Quarters Due To Lok Sabha Elections

India's Gross Domestic Product (GDP) growth slowed to 6.7 per cent in the first quarter of the financial year 2024-25 (FY25), marking the lowest rate in five quarters. down from 7.8 per cent in the previous quarter.

This figure also lags behind the 8.2 per cent growth observed in the first quarter (Q1) of FY24, according to government data released on Thursday (30 August).

Although the 6.7 per cent growth is generally in line with expert predictions, it falls short of the Reserve Bank of India's (RBI) forecast of 7.2 per cent for this period.

The slowdown has been linked to reduced government spending, possibly due to election-related activities, and the adverse effects of heatwaves during the quarter.

Industrial production experienced modest growth, increasing by 5.2 per cent compared to 4.7 per cent in the same period in 2024, India Today reported.

However, capital expenditure utilisation significantly decreased, with the government spending only 16.3 per cent of its budget estimates in Q1 of FY25, a decline from 27.8 per cent in the previous year.

Aditi Nayar, Chief Economist at ICRA, pointed out a significant drop in investment activity during Q1FY25, with capital expenditure by the central government and 22 state governments showing year-on-year contractions of 35 per cent and 23 per cent, respectively.

Despite this slowdown, India's economy is still expected to maintain a growth rate of over 7 per cent for the fourth consecutive year.

Moody's Ratings recently revised India's growth forecast for 2024 upwards to 7.2 per cent from 6.8 per cent, while the RBI continues to project a 7.2 per cent growth rate for FY25.