- India’s economy may be entering a cyclical growth slowdown, potentially pushing growth below 6.7% amid emerging risks.
- Factors Influencing Slowdown:
- Real salary growth for listed non-financial corporates, a proxy for urban wage trends, fell to 0.8% in Q2 FY25 from 2.5% in FY24.
- Post-pandemic demand surge is waning.
- Tight monetary policy and RBI’s macroprudential measures on unsecured credit are slowing personal loans and non-banking finance lending growth.
| The Finance Ministry’s review notes a slowdown in urban demand and industrial momentum but projects 6.5%-7% economic growth for 2024-25. Rural demand is supported by a favourable monsoon, while urban indicators like FMCG volume, automobile (down 2.3% in H1), and housing sales show declines due to softening consumer sentiment. Festive demand may uplift consumption, but risks from global tensions and economic fragmentation could impact growth. Demand conditions will be closely monitored. |
Dig Deeper: Read the concept of the Business Cycle.
