GDP growth slowed in first qtr of FY25 due to elections: CEA Nageswaran
New Delhi: India's GDP growth slowed in the first quarter of the current fiscal year due to the general elections and a reduction in government capital spending during that period, according to Chief Economic Advisor (CEA) V Anantha Nageswaran.
“A slight slowdown in GDP was anticipated due to elections and lower government capex in Q1. It was well within anticipation. Contraction due to Covid pandemic is behind us, GDP and GVA will continue to accelerate. Private sector capital formation is happening, it's playing its part in expanding the GDP scenario,” Nageswaran said at a media briefing on Friday after the GDP data was released, reported Moneycontrol.
GDP growth plummeted to 6.7 percent in the first quarter of FY25, to a five-quarter low, down from 7.8 percent in the previous quarter.
Chief Economic Advisor Nageswaran stated that India could comfortably aim for a GDP growth rate of 6.5-7 percent in FY25, as projected in the Economic Survey.
He also stated that growth exceeding 7 percent is achievable, given the additional support for employment generation outlined in the Budget.
“The Indian economy is sustaining the growth momentum. Although, there is potential for escalation of geopolitical risks. But we expect crude prices to remain in the current range. There is, however, no anticipation that we will confront higher crude prices,” he said.
The Chief Economic Advisor noted that with increased private fixed capital formation and favourable monsoon conditions, there are expectations for robust growth in private sector capital formation, which is likely to show positive trends in the coming quarters.
However, net FDI inflows to India decreased from $42 billion in FY23 to $26.5 billion in FY24.
“The decline in net FDI does not reflect loss of confidence in the Indian economy. Net FDI reflected profitable exits in FY24. It should act as an inducement in future. We have continued confidence from foreign portfolio investors. Gross FDI has been on an uptrend. Domestic retail investors are also showing resilience,” he said.
Despite an unfavorable base effect, the core sector output grew by 6.1 percent year-on-year in July 2024, surpassing the growth of 5.1 percent recorded in the previous month.
He stated that the core inflation rate had not experienced a spillover from food inflation, and suggested that improvements in the supply side may have prevented this.
He added that a formal investigation into the matter would soon begin.
Despite agricultural growth slowing to 2 percent in April-June, compared to 3.7 percent in the same period of the previous fiscal year, the Chief Economic Advisor said that a recovery is likely later in the financial year, thanks to normal rainfall in most regions.
He noted that the growth rate in agriculture appears to be bottoming out. Rural demand has started to pick up and is likely to gain further momentum in the coming months.
He highlighted that two-wheeler sales in the first four months are higher than last year, and there has been a modest increase in tractor sales as well.
He added that rural consumption has stabilized, and a good monsoon would provide an additional boost.
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