Why in news
India's real GDP growth for Q1 of 2024-25 (April-June 2024) was 6.7%.
This growth rate is the slowest in the last five quarters.
The growth was below the Reserve Bank of India’s expectation of 7.1%.
It was also lower than the 7.8% growth registered in the preceding quarter (Q4 of 2023-24).
Gross Value Added (GVA) Performance:
For the first time in a year, real GVA growth outpaced GDP growth, with a 6.8% increase in Q1 of 2024-25.
In contrast, real GVA growth lagged behind GDP growth by 1.8 percentage points in Q3 of 2023-24 and by 1.5 percentage points in Q4 of 2023-24.
Implications for Monetary Policy:
The Reserve Bank of India had projected a GDP growth of 7.2% for the fiscal year 2024-25.
The lower-than-expected Q1 growth, coupled with easing headline inflation, might influence the RBI's hawkish monetary policy stance.
The U.S. Federal Reserve’s indication of an interest rate cut next month could also impact the RBI’s approach.
Government and Public Sector Spending:
Government final consumption expenditure decreased by 0.2% in Q1.
Public capital expenditure, including projects financed by the Centre, States, and central public sector firms, was 33.3% lower than a year ago.
Despite this, gross fixed capital formation grew by 7.5%, recovering from a four-quarter low of 6.5% in the previous quarter.
Private consumption expenditure reached a six-quarter high of 7.4%, indicating a rebound from last year’s weak trends.
Sectoral Growth Insights:
The secondary sector, which includes Construction, Electricity, Gas, Water Supply & Other Utility Services, and Manufacturing, drove GVA growth in Q1, recording an 8.4% increase.
Construction saw a growth of 10.5%, Electricity, Gas, Water Supply & Other Utility Services grew by 10.4%, and Manufacturing grew by 7%.
Services Sector Performance: Growth in the ‘Trade, Hotels, Transport, Communication & Services related to Broadcasting’ segment, which is job-intensive, slowed to 5.7% in Q1, down from 9.7% in the same quarter last year.
The ‘Financial, Real Estate and Professional Services’ segment also saw a decline in growth, easing to 7.1% from 12.6% a year ago.
Economists attribute part of this slowdown to statistical base effects.
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