Slight slowdown in economy was anticipated due to elections and less spending: CEA Nageswaran

CEA V Anantha Nageswaran on August 30 said that slight slowdown in the economy was anticipated by experts due to elections and the resultant less spending. He said India’s FY25 growth projections average at 7 percent.

India’s economy grew at 6.7 percent in the April-June quarter of FY25 compared to 8.2 percent in Q1 of FY2023-24. This figure reflects a deceleration from the 7.8 percent growth seen in the previous quarter of FY24 and 8.2 percent in the corresponding period last year. 

“Real GDP has been estimated to grow by 6.7 percent in Q1 of FY2024-25 over the growth rate of 8.2 percent in Q1 of FY2023-24,” the Finance Ministry said in a statement. 

The CEA highlighted that final consumption expenditure, net exports have held up while growth rate in terms of agriculture, livestock is bottoming out. 

Addressing a press conference on August 30 evening, Nageswaran said that growth on supply side like manufacturing remains in expansionary mode with double-digit growth visible in steel consumption.  

He also highlighted that the upbeat sentiment in the services sector and robust digital transactions. The banking sector remains in good shape with low NPAs, he added, highlighting that the urban employment indicators have seen improvement with the quarterly urban unemployment rate declining.

The CEA said that a decline in net FDI not a cause of concern but has an underlying effect. In last 14-15 months, foreign portfolio investors bought equity in Indian markets in positive sign for the India story. 

Taking about the overall fiscal situation, he said the government has reiterated its fiscal deficit target and has brought it down to 4.9 percent. The government is looking at 4.5 fiscal deficit by FY26, he added. 

Nageswaran noted that rural demand is up and there is growth in auto sales. "Pickup in rural demand. Two wheeler sales in first four months is higher than last year. Modest rise in tractor sales. Rural consumption has stabilised. A good monsoon will give further fillip in coming months," he said.

The CEA highlighted that growth momentum remains strong amid strong corporate and bank balance sheets in the first quarter of the current fiscal year. He also said that agri, employment and skilling are the key areas of focus for the government.

Speaking about inflation, the CEA said food inflation in July has dropped significantly while the core inflation rate has not shown any spillover over food inflation. Food inflation spillout is not visible in the data, he added.

Shedding light on the government's near-term outlook Nageswaran said potential corrections in the financial markets will impact household finances and corporate valuations, while election outcomes across the world will implications for global trade and investments.

The Reserve Bank of India (RBI) revised its growth forecast for the April-June quarter downwards by 20 bps to 7.1 percent in its August monetary policy statement, citing muted government capex, lower corporate profitability, and lower core output. However, the central bank retained full-year FY25 GDP growth estimates at 7.2 percent.