Central government’s capex expenditure picking up after slow Q1: FM Sitharaman

New Delhi: India’s economic growth, which slowed to 6.7% in the first quarter of 2024-25 due to subdued government capital expenditure ahead of the general elections, has gained momentum in subsequent quarters with a pick up in spending, finance minister Nirmala Sitharaman said on Monday.

Speaking at the News18 India Chaupal event, Sitharaman said the Centre is well on track to meet its fiscal deficit target of 4.5% of gross domestic product (GDP) for FY25. The Centre’s capital expenditure plan for the financial year was set at ₹11.11 trillion, or about 3.4% of GDP.

"Because of elections, the capital expenditure plans announced didn't find much expenditure happening in Q1, because every department was looking at the post-election time. As a result, a large part of the influence or impact that could have been had with public expenditure was muted," she said.

"However, subsequently, during Q2 and Q3 (FY25), expenditure is picking up, which will trigger the slow down to move faster," she added.

India’s GDP growth moderated to 6.7% year-on-year in the April-June quarter, down from 7.8% in the previous quarter, according to data released by the statistics ministry last month. In FY24, India reported quarterly GDP growth rates of 8.2%, 8.1%, 8.6%, and 7.8%, and an annual growth rate of 8.2%.

Also read | Taxes could be lowered but challenges facing country demand resources: Nirmala Sitharaman

Sitharaman said the government is also exploring various measures to benefit the middle class, particularly through tax reductions. A group of ministers (GoM) is working on further rationalizing the goods and services tax (GST) by lowering rates and consolidating essentials into a single category with the lowest tax structure.

“The way this has to be done will have to be decided by the GoM first and then by the GST Council, which will look into the recommendations. All these are part of simplification and rationalisation of GST."

The finance minister also urged market participants to stay resilient while emphasizing the importance of exercising caution against speculative activity in the futures markets, and advised investors to be prudent with their life savings.

"We will have to encourage the markets to be robust. But, particularly when speculative activities are too much, there needs to be a sense of caution in our minds, and we also need to make sure that people with their savings don't go to high fluctuating and high-risk ventures," she said. “We need to be using authentic financial information before taking a call.”

Also read | Budget 2024: Why Nirmala Sitharaman waived import duty on critical minerals

Speaking on the lending spree by fintech companies, Sitharaman emphasized the need for caution while noting that it should not, however, stifle the markets. “It is a note of caution so people don't end up losing money…they need to understand the full risk before engaging.”

Sitharaman also addressed the allegations against Sebi chairperson Madhabi Puri Buch, and her husband Dhaval Buch, who have been accused by US-based short-seller Hindenburg Research of conflict of interest, and holding stakes in offshore entities linked to the alleged Adani money siphoning scandal.

She noted that the Buchs have been presenting facts to counter these allegations and emphasized that "the facts will have to be taken on board". 

On the Modi 3.0 government's reforms agenda, Sitharaman said bold reforms will be implemented despite the challenges of coalition politics. "There's no need for apprehension. Systematic and people-centric reforms will be carried on by the government." 

And read | Mint Explainer: Sebi’s Madhabi Puri Buch and the fuss over her ICICI payouts