New Delhi lowers GDP growth projections for 2025: Is the economy in trouble?

India's economic data for the second quarter of financial year 2024-2025, particularly from July to September, reported a slowdown, with GDP growth registering at 5.4%. This result marks the lowest growth in seven quarters according to government statistics, demonstrating a significant decline from the previous year when the growth rate was much higher at 8.2% for the same timeline. The Finance Ministry's report from November 2024 indicated an overall growth rate of around 6% for the first half of the fiscal year, largely attributed to lingering effects from general elections that hindered industrial and infrastructure spending. The decline in growth was characterized as a temporary setback by Finance Minister Nirmala Sitharaman, who optimistically projected an economic recovery as the fiscal year progresses. She underscored the fundamentals of the economy remaining strong despite the current downturn, while challenges faced in the first half were acknowledged. Furthermore, the Reserve Bank of India's monetary policy was cited as a possible contributing factor to the demand slowdown seen in this period. The World Bank recently enhanced its GDP growth forecast for India to 6.6% for the fiscal year 2024-2025, revising it upwards from 6.4%. This adjustment indicates confidence in India's status as the fastest-growing economy among its global peers, despite expectations that the growth rate may taper off in the near term. In December 2024, Morgan Stanley similarly lowered its GDP growth estimate for India to 6.3% for the current fiscal year, having previously projected a 6.7% growth rate. The slowdown is believed to be temporary, with projections suggesting GDP growth should rebound in the second half of the year, buoyed by government spending and strong agricultural production that can help stimulate rural consumption. In the first half of the current fiscal year's industrial sector, growth was calculated at 6%, a decrease from the 9.3% recorded in the prior year. Job creation figures also reported gains, with nearly 47 million jobs added, highlighting resilience in the economy even as high inflation restrained wage growth. Overall, there are hopes for a swift recovery by the end of the fiscal year as government priorities shift towards infrastructure and enhanced spending.