The economic growth slowdown in the second quarter of the current financial year was a blip due to a slower pace of spending, but the coming quarters will likely see healthy growth, finance minister Nirmala Sitharaman said on Tuesday.
She said a generalized slowdown in manufacturing is not expected, as it is restricted to a few sections.
“The government believes that the trend in Q2FY25 is only a temporary blip, and the economy will see healthy growth in the next quarters,” Sitharaman told Lok Sabha in her reply to the first supplementary demand for grants.
“Out of 23 manufacturing sectors in the index of industrial production, about half of them remain strong even now.”
After the GDP rose by 5.4% in July-September year-on-year, the lowest in seven quarters, some analysts feared that FY25 growth may come in below 6.5%. The H1FY25 growth has come in at 6%.
This led the RBI to lower its GDP growth forecast to 6.6%. RBI is projecting 6.8% and 7.2% growth in the third and fourth quarters of FY25. The Economic Survey had projected the economy to grow by 6.5% to 7% in the current fiscal.
She said the government expenditure usually slows down during general elections, which is what happened during the first quarter and part of the second quarter of FY25. Many of the schemes were given emphasis after the full budget was presented in August. In addition to that, due to religious observations, people did not spend for 15 days during the second quarter, which might have affected the economic activity, she said.
“So, we need to put this in context. Capital expenditure of the Union Government has grown by 6.4% year on year, between July and October 2024. So, I’m very optimistic about improved performance going further and going forward,” she said.
India has seen “steady and sustained” growth and its GDP growth rate has averaged 8.3% in the last three years, Sitharaman said, adding that India continues to be the fastest-growing major economy in the world.
The minister further said the government was committed to better management of food inflation through various measures including creating enough buffer stocks of essentials.
In the supplementary demand for grants, the Centre sought Parliament approval for net extra expenditure of Rs 44,143 crore for the current fiscal, out of a gross additional spending of Rs 87,763 crore.