Slowing of India's economic growth in Q1 FY25 due to ‘lower’ government spending: Shaktikanta Das

02 Sep 2024 Evaluate

The Reserve Bank of India (RBI) Governor Shaktikanta Das has said that the slowing of India's economic growth to a 15-month low of 6.7 per cent in the April-June quarter (Q1) of fiscal year 2024-25 (FY25) was due to ‘lower’ government spending in the wake of the enforcement of the model code of conduct for the recent Lok Sabha polls. The RBI had projected a growth rate of 7.1 per cent for the April-June quarter of this fiscal.

He said the components and main drivers responsible for the Gross Domestic Product (GDP) growth like consumption, investment, manufacturing, services and construction have registered a growth of more than 7 per cent. Only two aspects have pulled the growth rate slightly down. He pointed out those are government (both central and state) expenditure and agriculture.

He said the government expenditure was low during the first quarter perhaps due to elections (April to June) and operation of model code of conduct by the Election Commission. He added ‘We would expect the government expenditure to pick up in coming quarters and provide the required support to growth’.

Similarly, the agriculture sector has recorded a minimal growth rate of around 2 per cent in the April to June quarter. However, he noted the monsoon was very good and spread all over India except a few areas. So, everyone is optimistic and positive about the agriculture sector. He asserted ‘Under these circumstances, we have reasonably confident expectations that the annual growth rate of 7.2 per cent projected by the RBI will be materialized in coming quarters’.