Economic Indicators Show Divergent Trends

Recent economic indicators from November and December 2024 reveal a mixed and uneven growth trajectory for India's economy. Real GDP growth for the third quarter is anticipated to slightly increase to 5.5%-5.7% year-on-year, significantly below the Reserve Bank of India's (RBI) forecast of 6.8%.

Sectoral Performance and Economic Activity

The Economic Activity Index-Gross Value Added (EAI-GVA) reached a five-month high of 6.2% year-on-year in November 2024, driven by robust industrial sector performance and steady growth in services. However, EAI-GDP, estimating overall economic output, declined for the first time in 28 months, shrinking 0.8% year-on-year in November 2024, largely due to a sharp contraction in external trade.

Consumption and Investment Trends

Consumption growth slowed to 5.4% in November 2024 from 8.3% in October, reflecting weaker spending activity. Conversely, investment growth reached a six-month high of 5.2% year-on-year in November 2024. Excluding fiscal spending, EAI-GDP contracted by 1.7% year-on-year, marking its steepest decline in three years.

December Indicators and Sectoral Insights

December 2024 indicators showed mixed trends, with commercial vehicle sales hitting an eight-month high and passenger vehicle sales surging at the fastest rate in 25 months. Despite resilient Purchasing Managers’ Indices for manufacturing and services, toll collection growth slowed, and vehicle registrations dropped to their lowest level in nearly four years.

Looking Ahead

While select indicators point to resilience in key areas, the overall economic outlook remains cautious due to weaker consumption and trade performance, coupled with declining fiscal spending. The report underscores the need for sustained momentum across sectors to drive growth in the coming quarters.