GDP slowdown: RBI Governor blames it on LS polls, farm sector

RBI Governor Shaktikanta Das says the GDP number for Q1FY25 fell due to lower government spending because of the Lok Sabha elections and low growth in the farm sector.

He, however, maintained that India's growth story is intact and mentioned that all the other major sectors reported growth above 7 percent,  the news agency ANI quoted him while he was speaking at the National CA Conference in Bhubaneswar, Odisha.

“I would like to say with all humility and sincerity and with all confidence that the Indian growth story is intact," the RBI Governor said. 

Govt expenditure fell due to polls

On the reason for the moderation of growth, he said, “It's one component which has pulled down the growth, it's government expenditure, both central and state government expenditure, perhaps due to the election season.”

India's gross domestic product (GDP) grew at 6.7% in the April-June quarter, which is the lowest in five quarters, according to data released by the Statistics Ministry on August 30. The Indian economy grew by 7.8% in the previous quarter.

The RBI Governor hoped the government would increase spending in the upcoming quarters and the central bank would be able to achieve 7.2 percent growth in this fiscal year.

"I think going ahead I would like to believe that whatever growth projection we have given for the current year of 7.2 percent should happen should materialise,” he said.

Mr Das also said that in the first quarter, investments reported 7.5 percent growth, industries marked 7.4 percent growth, manufacturing grew by 7 percent, services sector grew by 7.7 percent, and the construction sector grew by 10.5 percent.

Monsoon `good', farm sector will do well

The farm sector grew by 2 percent in the April-June quarter but after a good monsoon, the sector is expected to report good numbers as the country has received good rainfall which will aid in agricultural growth, according to the RBI Governor.

“The agriculture sector in the first quarter has grown by 2 percent but thanks to the monsoon being very good this year monsoon initially made a slightly late start. But it has now covered large parts of the country except a few parts in eastern India,” he said.

Previously, Chief Economic Advisor (CEA) V Anantha Nageswaran attributed GDP numbers to Lok Sabha elections and lower capital expenditure by the government. He, however, has maintained that the growth momentum is strong in Q1FY25.

                                                   (By arrangement with livemint.com)