India's GDP Growth Slows to 5.4% in Q2, Marks Two-Year Low

India's economic growth has slowed to 5.4% in the July-September quarter of FY 2023-24, its lowest pace in two years, official data showed on Friday. This is a significant drop from the 8.1% growth recorded in the same period last year, mainly due to a poor performance by the manufacturing sector.

Despite the slowdown, India remains the fastest-growing major economy, outpacing China, whose GDP grew at a slower pace of 4.6% in the same quarter.

The last time India recorded its GDP growth below 5.4% was back in the third quarter of the FY 2022-23, when it registered at 4.3%. According to NSO statistics, the overall performance came in with an excellent increase in the agricultural sector because GVA for agriculture witnessed a growth rate of 3.5% for Q2 of 2023-24 as opposed to 1.7% for the corresponding period in the previous year.

However, the GVA growth in the manufacturing sector fell sharply, to 2.2% in the second quarter from 14.3% in the same period last year. This decline in the manufacturing sector, among other global and domestic challenges, has led to slower GDP growth.

For the first half of the fiscal year, (April-September), India's GDP growth is at 6%, whereas in the same period last year it was at 8.2%. In the first quarter of FY 2023-24, GDP growth was recorded at 6.7%.

Analysts are optimistic about growth prospects in the long run, as the country rebounded with a strong increase in agriculture and services - the two drivers of economic growth. The government might focus on increasing manufacturing by addressing sectoral weaknesses while driving future growth.