After an underwhelming performance in the recent general electons, the BJP-led ruling alliance (NDA) had some cause for cheer when it romped home at the recent assembly hustings in Haryana and Maharashtra. But that brings little cheer to the aam aadmi, as what really matters to him – the country’s economy – is doing poorly. The country’s economic growth has slowed down considerably to a near two-year low of 5.4 per cent in Q2 of fiscal 2025 (July to September 2024), as against 8.1 per cent in the corresponding quarter last year.

This disappointing performance is attributed to a poor show by the manufacturing sector. The half-yearly statistics are also dismal, with the GDP growth rate during the first six months (April to September 2024) standing at 6 per cent as compared to 8.2 per cent in the corresponding first half a year ago. In fact, this growth rate is substantially lower than even the most pessimistic estimate. This makes it clear that the actual situation is remarkably different from all the policy hype generated by the Prime Minister and his cheerleaders.

Unfortunately, the hype created by the government has failed to enthuse the private sector as private investment growth is equally disappointing at 5.4 per cent. Despite the much ballyhooed PLI scheme and inflated claims around ‘Make in India’, manufacturing growth has slowed down to a shocking 2.2 per cent. Despite better opportunities, exports have decelerated to 2.8 per cent and imports have contracted by 2.9 per cent, indicating serious domestic weakness. Mass consumption growth is sputtering, despite India emerging as the largest populated country in the world.

The GDP growth rate has nosedived despite the bounties of nature. Thanks to bumper and well-distributed rains, the agricultural sector has put up a cheerful performance. As per the National Statistical Office (NSO) data, gross value added (GVA) of the agriculture sector accelerated to 3.5 per cent in Q2FY25, as compared to only 1.7 per cent in the corresponding quarter last year. On the other hand, the GVA growth of the manufacturing sector has slumped to 2.2 per cent from 14.3 per cent achieved in the same quarter a year ago.

The outlook for the agriculture sector for the second half of the year is also quite positive. Says Chief Economic Advisor (CEA) V Anantha Nageswaran, “We expect the pickup in the agri sector to continue in the second half (October 2024 to March 2025).”

The poor show of the manufacturing sector is well-reflected in the case of steel. According to the CEA, while steel consumption in the country has gone up, there has been a fall in production. A silver lining here is that some of the slowdown factors may not continue at the same pace in the coming quarters. Besides steel consumption, construction is also a bright spot and the full-year growth has been a high single digit. But manufacturing’s score is poor – a consequence of the adverse impact of dumping. China continues to be a major exporter to India despite New Delhi’s repeated vows to stop imports from that country.

The government admits that adverse headwinds could impact the outlook for the second half-year. These include the potential impact of Chinese imports and policy uncertainties following the US Presidential elections, both of which could dampen revival in private sector investment.

One fails to understand why, inspite of the the much-touted PLI scheme and ‘Make in India’, the growth of the industries sector was down at 3.6 per cent during the second quarter as compared to 13.6 per cent in the same quarter a year ago. And the final consumption growth was extremely poor at 4.4 per cent, as against 14 per cent

Despite official optimism, it cannot be ignored that there is a marked slowdown in key high-frequency indicators, including industrial output, fuel consumption and bank credit growth. Weak corporate earnings too have weighed on the growth momentum.

It is surprising that at a time when the Finance Minister Nirmala Sitharaman should be in damage-control mode over the disappointing performance in key sectors, she was entrusted with monitoring the formation of the new Maharashtra government. Unarguably, the root cause of the poor show on the economic front is the Centre’s preoccupation with political activism rather than reversing the economic slowdown.