India's Economy Faces Unexpected Slowdown Amid Urban Consumption Woes

India's economic growth fell to 5.4% in Q2 2025, below expectations, due to weak urban consumption and high food prices. Analysts argue the slowdown may prompt economic policy changes if inflation stabilizes. Continued sluggish growth is expected despite potential public sector spending boosts to GDP in H2 2025.

India's economic growth has slowed significantly, data for the July-September period revealed on Friday, expanding by just 5.4% year-on-year against expectations of a 6.5% rise.

This downturn is largely attributed to weakened urban consumption, influenced by rising food prices, economists suggest.

Experts forecast that growth will remain subdued in upcoming quarters, even as public sector spending is anticipated to accelerate. Despite this, pressure on the Reserve Bank of India to alter interest rates remains unlikely until inflation stabilizes.