According to the rating agency Crisil, the growth is weighed down by high interest rates and low fiscal impulse.
“Risks are tilted toward the downside given the lacklustre second quarter growth number,” said the Crisil report.
However, certain high-frequency indicators from October such as automobile sales and export growth are showing encouraging signs of a revival in the third quarter, indicating the slowdown in the second quarter could be transitory.
The Indian economy grew by 5.4 per cent in real terms in the July-September quarter of the current financial year 2024-25, Ministry of Statistics and Programme Implementation’s official data showed on Friday. The quarterly growth was quite lower than RBI’s forecast of 7 per cent.
Last year same quarter, India grew 8.1 per cent.Indian economy grew 6.7 per cent in the April-June quarter, similarly lower than RBI’s 7.1 per cent forecast.Bset part is that agricultural growth has risen and is likely to increase further due to expectations of a healthy kharif harvest on account of the monsoon being 8 per cent above the Long Period Average at the season’s end. Higher reservoir levels also bode well for rabi output.
“All this should provide a fillip to agricultural incomes and rural consumption,” Crisil noted.
Additionally, increased kharif crop arrivals into the market are likely to ease the pressure on food inflation, which has been elevated for several months, eroding the purchasing power of both rural and urban households.
“Easing inflation, along with the onset of the festive and wedding season, is likely to buoy consumption growth in the second half of this fiscal.”
Meanwhile, India’s retail inflation was at 6.21 per cent in October, breaching the Reserve Bank of India’s 6 per cent upper tolerance level. High food inflation in October was mainly due to an increase in the inflation of vegetables, fruits, and oils and fats.
Food prices continue to remain a pain point for the policymakers in India, who wish to bring retail inflation to 4 per cent on a sustainable basis. The RBI has kept the repo rate elevated at 6.5 per cent to keep inflation contained.