The year-on-year real GDP growth rate has declined significantly to 5.4 percent, down from 8.6 percent in Q3 2023-24, signaling a return to growth levels last seen two years ago. Besides the numbers, the quality of growth has raised concerns about the near-term economic trajectory, the implications for the coordination of monetary and fiscal policies, and adherence to fiscal discipline.
The deceleration is primarily driven by the weakening investment and exports. Gross fixed capital formation, a key measure of investment in fixed assets, has significantly declined from 11.6 percent in Q2 of 2023-24 to just 5.4 percent in Q2 of 2024-25, with half-yearly growth also slowing from 10.1 percent in the first half of 2023-24 to 6.4 percent in the corresponding period of 2024-25. This underscores the waning momentum in capital investments, which are critical for sustained economic expansion.
The stark reversal in import growth further highlights the weakening dynamics. What stood at 11.6 percent in Q2 of 2023-24, has plunged to -2.9 percent in Q2 of 2024-25. This contraction, often reflective of reduced domestic demand and economic activity, adds to the growing concerns about the economy's overall health and trajectory.
Growth in government spending has also lost steam, underscoring a decline in fiscal impetus. In Q2 2023-24, government spending grew 14 percent, but this has dropped sharply to just 4.4 percent in Q2 2024-25.
This story is from the December 06, 2024 edition of The New Indian Express.
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This story is from the December 06, 2024 edition of The New Indian Express.
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