RBI Governor reveals reasons behind India's Q1 FY25 growth slowdown
What's the story
Reserve Bank of India (RBI) Governor Shaktikanta Das, has addressed the first quarter growth figures for the current financial year. The National Statistical Office (NSO) reported a growth rate of 6.7%, slightly lower than RBI's projected figure of 7.2%. The RBI Governor attributed the dip in overall growth to reduced government expenditure and slower pace of agriculture growth. He explained both central and state government spending was lower during this period, potentially due to elections held from April to June.
Sectoral performance
Various sectors recorded growth over 7%
Despite this minor discrepancy, Das emphasized that most sectors have seen robust growth surpassing 7% in the same period. He highlighted that key components driving GDP growth like consumption, investment, manufacturing, services, and construction have all registered a growth of over 7%. Specifically, investments saw a 7.5% increase, while industries marked a 7.4% rise. Manufacturing grew by 7%, the services sector expanded by 7.7%, and the construction sector witnessed a surge of 10.5%. Meanwhile, agriculture only grew by about 2%.
Future prospects
Das anticipates government spending to boost growth
Das expressed optimism about future growth, stating, "We would expect the government expenditure to pick up in coming quarters and provide the required support to growth." He also affirmed his confidence in achieving an annual growth rate of 7.2% as projected by the RBI. This statement comes despite NSO's latest estimates showing a slowdown in India's real GDP growth from 7.8% in the previous quarter and 8.2% in the same quarter previous year to 6.7% in April-June quarter.
Information
Economists' predictions align with Das's growth analysis
Government of India's Chief Economic Advisor V Anantha Nageswaran echoed Das's analysis, attributing GDP slowdown in Q1 FY25 to general elections and reduced government capital expenditure during that period. He suggested that India could achieve a GDP growth of 6.5-7% in FY25 as estimated in the Economic Survey.