India's Economy Shows Resilience Amid Global Challenges

India Outpaces China: Fastest-Growing Major Economy

Agriculture Sector Rebounds, Boosts India's GDP Growth

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• India's economy has shown resilience, recording a GDP growth rate of 5.4% in Q2, outpacing China's 4.6%.
• The agriculture sector rebounded with a 3.5% growth rate in Q2, expected to continue due to favourable conditions.
• The construction and tertiary sectors also showed promising growth, with private consumption witnessing a significant increase.
• Despite a global economic slowdown, India's economy continues to grow, driven by robust domestic engines and favourable government policies.

India's economy has demonstrated resilience amidst global economic challenges, clocking a GDP growth rate of 5.4% for the second quarter (July-September) of the current financial year, according to data released by the Ministry of Statistics. Despite a slowdown in the second quarter, India remains the fastest-growing major economy in the world, outpacing China, which recorded a 4.6% growth during the same period.

The GDP growth, although slower than the previous quarter, is still a testament to the strength of India's economy. The slowdown is expected to be temporary, with economists forecasting a pickup in government spending and easing inflation to shore up growth in the coming months. The Gross Value Added (GVA), a more stable measure of growth, increased by 6.8% in April-June from a year earlier, compared to 6.3% in the previous quarter.

The agriculture and allied sector has shown a significant rebound, registering a growth rate of 3.5% in Q2 of FY 2024-25 after sub-optimal growth rates ranging from 0.4% to 2% observed during the previous four quarters. This growth is expected to continue in the coming months, benefiting from favourable monsoon conditions, increased minimum support prices, and an adequate supply of inputs.

Sectoral Performance and Employment Trends

The construction sector, driven by sustained domestic consumption of finished steel, has also shown promising growth rates of 7.7% and 9.1% respectively in Q2 and H1 of FY 2024-25. The tertiary sector, which includes Trade, Hotels, Transport, Communication & Services related to Broadcasting, has clocked a growth rate of 7.1% in Q2 of FY 2024-25, compared to 6% in Q2 of the previous financial year.

Private consumption, which accounts for 60% of the country's GDP, has witnessed a growth rate of 6% and 6.7% respectively in Q2 and H1 of the FY 2024-25 over the growth rate of 2.6% and 4% in Q2 and H1 of the previous financial year. This acceleration in the growth rate is a positive sign for the future of the economy.

Government Final Consumption Expenditure has also rebounded to a growth rate of 4.4% after having slowed in the previous quarter due to the Lok Sabha elections. This rebound is expected to contribute to the overall growth of the economy. On the employment front, the formal workforce is expanding, with notable increases in manufacturing jobs and a strong inflow of youth into organised sectors. This expansion is a positive sign for the economy, indicating increased economic activity and job creation.

Economic Outlook and Future Prospects

The Reserve Bank of India (RBI) has maintained its GDP growth forecast for the current fiscal year at 7.2%. RBI Governor Shaktikanta Das, while presenting the monetary policy review last month, stated that India's growth story remains intact as its fundamental drivers - consumption and investment demand - are gaining momentum.

Despite the slowdown in the second quarter, the Indian economy is showing signs of resilience and growth. The government's fiscal deficit for the April-October period of FY24-25 reached Rs 7.50 lakh crore, representing 46.5% of the full-year target. This is marginally higher than the 45% reported during the same period in FY23-24, according to data from the Controller General of Accounts (CGA).

The economic outlook for the coming months is cautiously optimistic, with the agricultural sector likely to benefit from favourable monsoon conditions, increased minimum support prices, and adequate supply of inputs. High-frequency indicators of economic activity in India have shown a rebound in October, including indicators of rural and urban demand and supply side variables like Purchasing Managers' Index and E-way bill generation.