December quarter will make up for poll-induced growth slowdown: Nirmala Sitharaman
- The finance minister conceded, however, that the plateauing of consumption demand in developed economies was a matter of concern for India’s exports.
New Delhi: India’s economic growth decelerated in the September quarter because of the general election earlier in the year and not a systemic issue, finance minister Nirmala Sitharaman said on Friday, expressing confidence that growth in the December quarter would make up for the lost momentum.
She conceded, however, that the plateauing of consumption demand in developed economies was a matter of concern for India’s exports.
Speaking at the India Japan Forum 2024 in the capital, a closed-door meeting between participants from both countries, Sitharaman said during the first quarter of election years, spending slows down as central and state administrations tend to focus on the electoral process, and this is reflected in the second-quarter growth figures.
India’s economy expanded at 5.4% in the September quarter, down from 6.7% in the June quarter and 8.2% in the September quarter of FY24. China’s economy grew 4.6% and the US economy grew 2.8% in the September quarter.
The minister said in response to a question from NK Singh, chair of the Fifteenth Finance Commission, that the government was aware of the factors that might influence India’s consumption demand. “I am elaborating this to say this is not a systemic slowdown, but more of absence of activity on public expenditure, capex and so on. I expect the third quarter also to make up for all this. So the growth number is something which is not necessarily going to get affected,” Sitharaman said.
“I would think India, not just for this year, but for the next year and the year after that also, has very good chances and opportunities to be the fastest-growing economy,” she added.
Concerns about demand ‘legitimate’
Sitharaman, however, admitted that concerns about the impact of the global demand slowdown on countries like India were “legitimate”. In October the International Monetary Fund maintained its 3.2% forecast for global economic growth in 2024 and 2025, saying growth looked stable but underwhelming, with the balance of risks tilted to the downside.
“If there is a plateauing of demand in developed countries, it is a matter of concern,” Sitharman said. She added that climate-related concerns weigh heavily on India, especially on farm produce.
Also read: Centre likely to maintain capex push in FY26
Saturating global demand for goods – whether in labour-intensive export sectors such as textiles or more sophisticated products – poses a challenge as it removes the marginal additional support to domestic manufacturing from the export opportunity, the minister said.
The Economic Survey 2023-24 released in July conservatively projected real GDP growth of 6.5-7% for FY25, with risks evenly balanced. After the second-quarter growth was reported, chief economic advisor in the finance ministry V Anantha Nageswaran said last Friday that the 5.4% expansion was disappointing but not alarming.
RBI cuts forecast
The Reserve Bank of India (RBI) on Friday lowered its growth forecast for the current financial year from 7.2% to 6.6% amid subdued manufacturing output in the second quarter and concerns about a moderation in urban demand on a high base.
Sitharaman will present her budget for FY26 on 1 February, laying down the NDA government’s strategy to manage the economy over the next four years. She said it was important for the union government to engage with states on reforms and assist them where needed.
“I find many states are keen to work with the centre to understand how to go about this process and we are happy to facilitate them. But greater engagement is required for those particular factors of production-related reforms which will have to be undertaken,” the minister said. “This engagement will continue. We will talk with states, we will take them on board and take it forward.”
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Business NewsEconomyDecember quarter will make up for poll-induced growth slowdown: Nirmala Sitharaman
First Published:6 Dec 2024, 06:50 PM IST
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