India's GDP growth slowed in the second quarter: +6.7%.

Public expenditure also weighed on the GDP figure. In the past few months, the Indian government reduced investments in the run-up to the elections, which lasted for more than six weeks until 1 June. According to Garima Kapoor, an economist at Elara Capital, politics-related uncertainty adversely affected infrastructure and capital expenditure in the June quarter, but economic activity would recover. "Our real sector indices continue to signal a stable and healthy economy, driven by consumption."

In the first quarter of the fiscal year (which starts on 1 April in India), the government spent 16.3% of the capital budgeted for the 12 months, compared to 27.8% in the same period last year. Government spending in the June quarter decreased by 7.7%, compared to an increase of 10.8% in the same period a year earlier. After a stunted election victory, Prime Minister Narendra Modi increased spending with an annual budget of $576 billion, aiming to stimulate the economy.

According to Bloomberg Economics, the economy will recover in the third quarter of 2024 due to increased government spending. Another positive aspect is that the lower bond yields are reducing financing costs for large companies.

That said, there is a "risk that profitability in the corporate sector will remain subdued in the coming quarters, driven by higher input costs and reduced demand," Kaushik Das of Deutsche Bank wrote in a note. If this happens, growth could fall short of the central bank's forecast of more than 7 per cent growth in each quarter of the current fiscal year.

Earlier this month, the Reserve Bank of India kept its key rate unchanged, focusing on reducing inflation towards its medium-term target of 4 per cent.

Despite strong growth compared to other economies, India has lagged behind in job creation and inclusive economic growth, which has weighed on the wages and consumption of low-income households, as well as on investment by private companies.

"It will take 75 years for India to reach a quarter of the per capita GDP of the United States," reads a World Bank report released in early August. The document adds that 'with growing demographic, ecological and geopolitical pressures, there is no margin for error'.