‘Some slackening of momentum but GDP may have risen 6.8% in Q2’

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Last Updated23/10/2024

India’s GDP is projected to grow 6.8% in the second quarter of 2024-25, marginally higher than the 6.7% uptick in the first quarter (Q1), as per an economic activity index compiled by the Reserve Bank of India (RBI).

India's economy is projected to grow at 6.8% in the second quarter of the financial year 2024-25, as per an economic activity index compiled by the Reserve Bank of India (RBI).
This is a slight improvement over the 6.7% growth recorded in the first quarter. Despite geopolitical tensions and some economic indicators losing momentum in Q2, the outlook remains supported by strong domestic demand, according to the RBI's October Bulletin article led by Deputy Governor Michael Debabrata Patra.

Several high-frequency indicators have shown signs of slowing down, including:
- GST collections
- Automobile sales
- Bank credit growth
- Merchandise exports
- Manufacturing PMI (Purchasing Managers’ Index)
The slowdown is attributed to factors like unusually heavy rains in August and September and cultural events such as Pitru Paksha. However, there are positive signals, such as improved consumer perceptions about the current and future economic situation, along with industry optimism about growth prospects.
Additionally, private investment and consumption spending are expected to revive during the festival season.

Inflation, which was below the RBI's 4% target in July and August, surged to 5.5% in September due to food price pressures. The rise in vegetable prices is seen as temporary, but concerns persist over the price momentum in edible oils and its potential impact on overall inflation.
The report also highlighted the global risks posed by higher commodity prices, particularly crude oil and metals, which could affect inflation and growth worldwide.

The article flagged concerns over stretched stock market valuations and noted that key indices pulled back in October, reflecting global geopolitical uncertainties, particularly in the Middle East. The outlook for corporate earnings in Q2 FY25 and trends in global markets will play a crucial role in shaping investor sentiment in the coming months.