Crisil’s report attributes the slowdown to high interest rates and reduced fiscal support. “Risks are tilted toward the downside given the lacklustre second quarter growth number,” the report noted.

The Indian economy grew by 5.4% in real terms during the July-September quarter, as per data from the Ministry of Statistics and Programme Implementation. This figure fell short of the Reserve Bank of India’s (RBI) 7% forecast and marked a stark decline compared to the 8.1% growth in the same period last year.

In the April-June quarter of FY 2024-25, GDP growth was 6.7%, also below the RBI’s projection of 7.1%.

Signs of Revival in Third Quarter
Despite the subdued quarterly figures, high-frequency indicators from October, such as automobile sales and export growth, suggest potential recovery in the third quarter. Crisil believes the slowdown in the second quarter may be temporary.

Agricultural Growth: A Silver Lining
The agricultural sector showed resilience, with growth expected to strengthen further. A healthy kharif harvest, supported by monsoon rainfall 8% above the Long Period Average and higher reservoir levels, is anticipated to boost rural incomes and consumption.

“Increased kharif crop arrivals into the market are likely to ease the pressure on food inflation, which has remained elevated for months, eroding the purchasing power of households,” Crisil added.

Inflation Challenges
India’s retail inflation stood at 6.21% in October, exceeding the RBI’s upper tolerance limit of 6%. Elevated food prices, particularly for vegetables, fruits, and oils, were the main contributors. Policymakers aim to bring inflation down to 4% sustainably, but high food prices remain a challenge.

The RBI has maintained the repo rate at 6.5% to manage inflationary pressures. Crisil expects easing inflation and festive season demand to support consumption growth in the second half of the fiscal year.

While signs of recovery are visible, sustaining growth amid global and domestic challenges will remain a key focus for policymakers and stakeholders.

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