Second half likely to see a pick-up in GDP growth, says India Inc

The GDP data for Q2 this year are a reflection of the vagaries of monsoons, as well as slower than expected consumption growth in urban areas

Despite a sharper-than-expected slowdown in India’s GDP growth during the second quarter of financial year 2025 (Q2FY25) to 5.4 per cent, leaders of India Inc. remained optimistic about a recovery in growth in the remaining second half of the year, which ends in March 2025.

 

The GDP data for Q2 this year is a reflection of the vagaries of monsoons, as well as slower than expected consumption growth in urban areas. The impact was felt across industries, such as retail, mining to automobiles, they said.

 

“Urban demand is low but rural demand is getting better,” said the chairman of a large company, asking not to be quoted.

 

“With a pickup expected in capital expenditure by the government, growth in demand during the festival season, and stable rural demand, we are likely to see better numbers for the coming quarters and FY25,” said Vineet Agarwal, Managing Director, Transport Corporation of India, a logistics and supply chain management major.

 

Other CEOs expressed concern over the trend, acknowledging that the monsoon had played a significant role in pulling down the growth.

 

“This suggests that the India story may be overstated, and the stock market boom might not be justified. While India will remain one of the fastest-growing economies globally, it won’t mirror China’s double-digit growth years. India’s growth will likely be more moderate, around 6-7 per cent, which is a more sustainable and realistic expectation. We need to recognise this and plan our expansions accordingly. New-age industries will experience unprecedented growth, as their current base remains low,” said Sanjay K Jain, Managing Director of textile company TT Limited and Chairman of the Indian Chambers of Commerce's National Committee.

 

Dilip Jose, MD and CEO of Manipal Hospitals, India’s largest private hospital, stated that the industry must analyse the components of the GDP figure and assess the performance of the healthcare sector.

 

“Apart from that, given the strong fundamentals driving the sector, the medium and long-term outlook remains positive. Therefore, one quarter should not affect our plans," Jose said.

 

Sushil Suri, CMD of Morepen Labs, a New Delhi based pharmaceutical company, said he does not foresee any significant impact on consumer spending or noticeable changes on the ground due to the latest GDP figures.

 

“In the next two quarters, Rs 6 trillion will be spent on 5 million Indian weddings, and this money will eventually flow into the economy. The long-term outlook for India’s consumption story remains positive. We remain optimistic and aggressive, with no change in our approach. Investments and manufacturing, which were key drivers in the same quarter last fiscal year, were the primary drag,” Suri said.

 

Interestingly, as per the data released Friday, investments saw the sharpest slowdown (5.4 per cent in Q2 as compared to 7.5 per cent previous quarter), as support from government capital expenditure was weaker in the first half of this year due to elections.

 

Private consumption, too, slowed but grew faster than overall GDP growth.

 

On the other hand, the impact of the Reserve Bank of India’s past rate hikes is curbing credit growth this financial year. While manufacturing growth slowed sharply (2.2 per cent vs 7 per cent), contact-based services improved. This suggests the slowdown is likely to have been around goods demand, while services demand has held up. With many companies not spending in new capacities, analysts said investment growth needs the private corporate sector to take the baton from the government, as the latter pursues trimming its fiscal deficit.