India outperforms other major economies even as growth slows in April-June By Reuters

By Manoj Kumar

NEW DELHI (Reuters) – India’s economic growth slowed to 6.7 percent from a year in the April-June quarter as a drop in government spending during a national election weighed, data showed on Friday, but it remained the major economy with the most fastest growing in the world. .

Gross domestic product growth was lower than a 6.9 percent increase expected by a Reuters poll and compared with a 7.8 percent rise in the previous quarter.

However, it was faster than the 4.7% in China, Asia’s largest economy, in April-June, and India’s slowdown is expected to be temporary as economists estimate that lower inflation and an increase in government spending will support growth in the coming months.

Political uncertainty also weighed on investment and consumption in the April-June quarter, official data showed.

Gross value added (GVA), seen by economists as a more stable measure of growth, rose 6.8 percent in April-June from a year earlier, up from 6.3 percent in the previous quarter.

Upasna Bhardwaj, chief economist at Mumbai-based Kotak Mahindra Bank, said the GDP numbers were weaker than expected, but GVA remained firm while non-agricultural growth held up.

“We maintain our expectations for GDP growth of 6.9% in 2024/25, helped largely by rural demand and government spending, closely watching likely fatigue in urban demand, private investment and the pace of the global slowdown,” it said it.

For the full fiscal year, India’s central bank expects the economy to grow 7.2 percent, slower than the previous year’s 8.2 percent growth, dragged down by a contraction in government spending and tighter bank rules centers on retail loans.

Government spending in real terms fell 0.2 percent year-on-year in April-June, compared with a 0.9 percent increase in the previous quarter, the data showed.

Prime Minister Narendra Modi has taken several steps to boost the economy since the recent national election, in which his Bharatiya Janata Party (BJP) failed to win an outright majority and has to rely on allies to run the government for first time in a decade.

Manufacturing, which accounts for about 17 percent of India’s GDP, rose 7 percent year-on-year in the April-June quarter, compared with an 8.9 percent expansion in the previous quarter.

Agricultural production rose 2% year-on-year in the same period, up from 1.1% in the previous quarter. Heavy rainfall this year is expected to boost agricultural production, rural incomes and consumer demand, a trend reflected in rising sales of two-wheelers and tractors in July.

THE JOBS CHALLENGE

Despite strong growth relative to other economies, India faces challenges in terms of job creation and more inclusive economic growth. These problems affected real wages, household consumption among lower income groups, and private investment.

The government stepped up spending in last month’s $576 billion annual budget, which includes billions of dollars for affordable housing and rural jobs, to boost economic activity.

Consumer spending, which makes up about 60 percent of GDP, rose 7.4 percent in April-June from a year earlier, up from 4 percent in the previous quarter. Capital investment also rose 7.4% from 6.5% in the previous quarter.

Economists anticipate that lower retail inflation could prompt the central bank to cut its policy rate later this year, potentially boosting consumer spending and supporting private investment.