Mint Primer: Why consumer demand needs a quick revival
Subscribe to enjoy similar stories. Yes. In the second quarter of the current fiscal, manufacturing growth slowed to just 2.2% from 7% in the first quarter.
This pulled down industry’s contribution to the gross domestic product (GDP) growth significantly, causing overall economic growth to tank. In the second quarter, India’s GDP growth fell sharply to 5.4% as against 8.1% registered in the same period a year ago. In the first quarter of FY25, growth stood at 6.7%.
Agriculture and services sectors did relatively better in Q2FY25. The farm sector grew by 3.5% as against 2% in Q1, while the services sector maintained its growth at 7% levels. The main reason is the fall in demand for goods.
Urban demand suddenly dropped in the second quarter as consumers, battered by an insignificant increase in their earnings and runaway food inflation, held back from spending. Rural demand, a bugbear till recently, began to revive, but was insufficient to counterbalance weak urban consumption. Exports remained sluggish.
It grew by just 2.8% in Q2 against 8.7% in Q1. That apart, an unusually heavy monsoon impacted power generation and mining. All these pulled down the growth in industry output to 3.6% in Q2, as against 8.3% in Q1.
Also read: India’s manufacturing growth at 12-month low in December The government will hope so, as power and mining bounce back post-monsoon. Government spending, which slowed down in Q1 due to elections, had picked up and this, it claimed, would push growth in Q3. But the HSBC India Manufacturing Purchasing Managers’ Index fell to a 12-month low in December, indicating continued weakness in factory output.
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