Acknowledging the challenges of geopolitical conditions and exports uncertainty going ahead, chief economic advisor V. Anantha Nageswaran remained optimistic about a rebound in the coming months hoping for a capex push, after India’s GDP growth slowed below expectations to 5.4 percent in the second quarter of FY25.
“There is room for capex to be ramped up in the remaining 3-4 months. Capex growth will pick up in coming months—this is our best hope. It is too soon to say that 6.5 percent growth is in danger, and we should not extrapolate too much,” he said during a media briefing post the Q2 GDP growth slowed to below expected level of 5.4 percent.
The Economic Survey had pegged GDP growth for FY25 in a range of 6.5-7 percent.
“Real GDP growth in Q2 is on the lower side. There is a higher than expected decline in growth in Q2. The global developments have shown up, export orders have moderated. There is a spillover of global factors on domestic manufacturing. Spike in trade uncertainties is seen due to presidential elections in the US. There is concern about capital formation in Q2 data. We should be realistic about growth in a global context. It is disappointing but it's not an alarming situation. There are some bright spots. The economy is resilient though Q2 GDP is below expectations,” he said.
India’s GDP growth slowed to 5.4 percent in the second quarter of FY25, marking the lowest growth in seven quarters, according to data released on Thursday. The contraction in mining, which hit an eight-quarter low, along with setbacks in manufacturing and utility services, weighed on overall economic performance.
“Bulk of the slowdown is from the supply side, attributable to manufacturing and mining. Coal, natural gas, and crude oil, which constitute 50 percent of the mining sector, were tepid in Q2. The spillover of global factors has impacted domestic manufacturing, with export orders moderating,” he explained.
Despite these challenges, agricultural growth provided a cushion. Record kharif production and all-time high tractor sales were highlighted as key contributors, with expectations of continued growth in the agriculture sector in the second half of FY25.
“Pickup in the agriculture sector is expected to continue, and the uptick in e-way bill generation is encouraging,” the CEA said.
Looking forward, Nageswaran emphasised the need for deregulation at local government levels and increasing state capacity for public investment. “GDP growth in Q2 is disappointing, but we can use it as an opportunity to double down on deregulation and ramp up state capacity for public investment,” he added.
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