Q2 GDP is not systemic slowdown, more due to lack of capex, public spending: FM Sitharaman

Union finance minister Nirmala Sitharaman

In her first remarks, Union finance minister Nirmala Sitharaman on December 6 said the sharp decline in the growth of gross domestic product (GDP) in the September quarter is "not systemic" and revealed that she expects it to pick up in the third quarter.

"Q2 GDP is not a systemic slowdown, it is more due to absence of activity on capex and public spending. I expect Q3 to make up for all this," the minister said during a conversation with 15th Finance Commission chairman N K Singh at the India Japan Forum 2024.

Sitharaman argued that the slowdown in the September quarter data "should put in context" of an economy and governance structure that was "focussed on elections".

However, the finance minister expressed confidence that India's economic growth won't be badly affected despite reporting a seven-quarter low GDP of 5.4 percent.

"Growth numbers won't necessarily get badly affected. I still think this year and next year there are still very good chances for the country to remain the fastest growing economy in the world," Sitharaman said.

Among the challenges for the country, the minister said plateauing of global demand in developed countries is a "matter of concern" for Indian exports.

She also highlighted that the purchasing power of Indians are 'improving'. However, "there are also concerns about wages saturating. We are aware of these factors that may have a play on India's own consumption," Sitharaman added.

Sitharaman also reasoned that 2024 was an election year and therefore the focus was more on election management for states and the Centre. This has led to public expenditure-related activities being put in the backburner, she said.

"Therefore the catalyst for consumption has become slower, which you saw in Q2 growth GDP numbers."