GDP growth slowdown to 5.4% may be a temporary blip or have long-term implications: CEA

Chief Economic Advisor V Anantha Nageswaran

The slowdown in India’s GDP growth to 5.4 percent in the second quarter of FY25 may either be a temporary aberration or indicative of more serious structural challenges, fuelling concerns about its potential impact on urban household incomes, consumption, and savings patterns, Chief Economic Advisor (CEA) V Anantha Nageswaran, speaking at the Global Economic Policy Forum 2024.

At this stage, it should not be ruled out that it could be very temporary or mundane or something more serious, he said at the Global Economic Policy Forum 2024, organised by the Ministry of Finance and the Confederation of Indian Industry (CII).

Mixed Signals for Policy Makers

“It could be a simple seasonal factor in September because of rains or religious observance, which impacted economic activity. It could be either of them,” the CEA said.

“Or it could be something more fundamental, such as the ability of the states to spend what is budgeted or what is happening in the private sector post-Covid in terms of hiring and compensation. These developments may have longer-term implications for urban household income, consumption, and savings patterns compared to pre-Covid times,” he said.

“It is not that we think that the second quarter slowdown is purely a data artefact and as more data comes in it will automatically be upgraded,” he said.

Despite the Q2 blip, Nageswaran reassured that India is likely to achieve the annual GDP growth target set in the Economic Survey. “We will be on track to achieve the kind of growth numbers we had pencilled in the Economic Survey, between 6.5 percent and 7 percent for the whole financial year,” he asserted.

The GDP slowdown comes amid mixed economic signals, including improving private investments and exports but subdued consumption. Nageswaran’s remarks underscore India’s economic recovery as it balances short-term disruptions and long-term structural changes.

“We are at this stage not necessarily ruling out that it could be very temporary or mundane or something more serious,” the CEA said, reflecting a cautious optimism about the country's growth trajectory.