India’s economic growth moderated to 5.4% in the second quarter of FY25, down from 8.1% in the same period last year and 6.7% in the previous quarter, according to government data released on Friday. Economists had anticipated this slowdown, attributing it to weaker consumption, subdued government spending, and adverse weather impacts on key industries. A survey by The Economic Times of 17 economists had forecast GDP growth at 6.5%, while a Reuters poll projected a similar figure, lower than the Reserve Bank of India’s (RBI) estimate of 7%.Catch all Q2 GDP growth live updates hereIndia Q2 GDP: Sectoral PerformanceReal Gross Value Added (GVA), a core measure of economic activity, expanded by 5.6% in Q2 FY25, a slowdown from 7.7% in the corresponding period last year. Nominal GVA growth also eased to 8.1% compared to 9.3% in the same period last fiscal. Private Final Consumption Expenditure (PFCE), a key GDP driver, grew by 6.0% in Q2, up from 2.6% in the same period last year. Government Final Consumption Expenditure (GFCE) saw a recovery, expanding by 4.4% after several quarters of negative or minimal growth.Key sectoral highlights include:Manufacturing and Mining: Manufacturing grew at a sluggish 2.2%, while mining and quarrying contracted by 0.1%. Agriculture: The agriculture sector rebounded with a 3.5% growth rate, recovering from sub-optimal performance in the past four quarters. Construction: Sustained domestic steel consumption drove growth in the construction sector to 7.7% in Q2.Services: The services sector posted a robust 7.1% growth, with the trade, hotels, and transport segments registering 6.0% growth. Also Read: India's April-October fiscal deficit at Rs 7.51 lakh crore, widens on-year to 46.5% of FY25 aim 115807574Economic ChallengesEconomists have flagged a combination of challenges impacting growth: Inflation: Retail food inflation surged to 10.87% in October, eroding consumer purchasing power. Meanwhile, headline inflation surged to 6.2%, breaching RBI's comfort zone (of 2-6%). Corporate Earnings: Leading firms reported their weakest quarterly performance in over four years, raising concerns about investment slowdowns. Consumption Trends: Urban private consumption, which accounts for 60% of GDP, remained sluggish due to higher borrowing costs and stagnating wage growth, despite signs of recovery in rural demand. RBI’s policy responseThe RBI has maintained its GDP growth projection for FY25 at 7.2%, down from 8.2% last fiscal. Its Monetary Policy Committee kept the benchmark repo rate unchanged at 6.50%, signaling a cautious approach amid persistent inflation. Government officials and analysts expect a gradual economic recovery in the latter half of FY25, driven by increased state spending following elections and improved rural demand after a favorable harvest. Construction activity and service-sector momentum are also anticipated to support growth. India’s growth trajectory in the coming months will depend on managing inflationary pressures and reviving consumption to stabilise the economic momentum.