India’s GDP growth slows to 5.4% in Q2 FY25, full-year growth may dip below 6.5%: SBI report

India's GDP growth dropped to 5.4 percent in Q2 FY25, primarily due to a manufacturing-led slowdown, with full-year growth expected to fall below 6.5 percent, as per an SBI report

India’s Gross Domestic Product (GDP) is projected to fall below 6.5 per cent for the current financial year 2025, as GDP growth in the second quarter (Q2 FY25) slowed to 5.4 per cent, according to a report released by the State Bank of India (SBI).

The report emphasised that the real GDP growth for the first half of FY25 (H1 FY25) was recorded at 6.0 per cent, with an estimated growth of 6.5-6.8 per cent projected for the second half (H2 FY25).

According to the report, the manufacturing-led slowdown played a significant role in the sluggish economic performance. Growth in the industry sector dropped to a six-quarter low of 3.6 per cent during Q2 FY25, substantially affecting the overall GDP numbers.

The report stated, "With 6.0 per cent real GDP growth in H1 FY25, the overall growth for the full fiscal year is expected to fall below 6.5 per cent (assuming 6.5-6.8 per cent growth in H2). This manufacturing-led slowdown gives a sketchy reading when juxtaposed against non-impulsive credit growth."

The incremental growth in the industry sector during Q2 FY25 amounted to Rs 42,515 crore, a sharp decline compared to Rs 1.4 lakh crore in the same period of the previous year. This marks a decrease of approximately Rs 1 lakh crore in incremental terms.

The report added, "After seven quarters, GDP growth has dropped below the 6.0 per cent mark in Q2 FY25, primarily due to 3.6 per cent growth in the industry sector."

Despite some resilience shown by other sectors, the underperformance of the industrial sector weighed heavily on the overall economy.

The services sector grew by 7.1 per cent in Q2 FY25, marginally higher than the 6.0 per cent recorded in Q2 FY24, but nearly flat compared to the 7.2 per cent growth in Q1 FY25. The agriculture sector, which has consistently performed well since the pandemic, recorded a growth of 3.5 per cent in Q2 FY25, a significant rise compared to 1.7 per cent in Q2 FY24. However, its contribution to overall growth remained modest, with a weighted contribution of just 40 basis points.

The Gross Value Added (GVA) growth for Q2 FY25 stood at 5.6 per cent, while nominal GDP grew by 8.0 per cent. This marks the first instance in seven quarters where GDP growth has dipped below the 6.0 per cent threshold, underscoring the challenges facing the economy.

According to ANI, the report highlighted that year-on-year comparisons may provide a skewed perspective and recommended focusing on incremental growth figures. While India’s economy has demonstrated resilience in previous years, the current slowdown indicates a temporary pause in the growth trajectory, driven by broad-based sluggishness in the industrial sector.

As per ANI, the report concluded that the Indian economy continues to face challenges but remains poised to recover as the industrial sector stabilises.

(With inputs from ANI)

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