Private consumption growth slows down to 6% in Q2FY25

India’s GDP growth slumped to its lowest level in seven quarters at 5.4 percent in the second quarter of FY25

After accelerating to a seven-quarter high of 7.4 percent in Q1 FY25, Private Final Consumption Expenditure or PFCE, slowed down to 6.0 percent during July-September.

On a year-on-year basis, PFCE witnessed a growth from 2.6 percent in Q2FY24, the Ministry of Statistics and Programme Implementation (MoSPI) said in a release on November 29.

In the first half of the current fiscal, private consumption grew 6.7 percent versus 4.0 percent during the same period in 2023-24.

"Government Final Consumption Expenditure (GFCE) has rebounded to a growth rate of 4.4 percent after observing either negative or low growth rates in previous three quarters," the release said.

The rise in GFCE during July-September from 0.2 percent in the first quarter of the current fiscal shows that expenditure by the government has made an impressive comeback.

PFCE is a key indicator to measure spending incurred by households.

"We are likely to see private consumption being a missing agent for some time. Urban wage bill growth has been steadily declining on a real basis for more than one and a half years, and currently is well below the 5-year pre-covid average of 9 percent," according to Emkay Global's Madhavi Arora.

The fall in income capacity of the urban sector has hit their consumption profile, albeit with a lag. There has been a pronounced fall in urban consumption demand in the last three to six months, across durables and non-durable items, as also seen in various consumption-based company results and commentaries, Arora added.

India’s GDP growth slumped to its lowest level in seven quarters at 5.4 percent in the second quarter of FY25, as mining growth contracted to an eight quarter low, along with manufacturing and utility services taking a hit.

The economy had grown at 6.7 percent in the previous quarter and 8.1 percent in the year-ago period.