India Q1FY25 GDP: CEA Nageswaran cites elections, lower capex as reasons for economic slowdown in June quarter

Chief Economic Advisor (CEA) V Anantha Nageswaran has attributed India’s moderate GDP growth to Lok Sabha elections and subdued capital spending by the government. He, however, has maintained that the growth momentum is strong in Q1FY25.

The country's GDP grew by 6.7 per cent in the April-June quarter this fiscal compared to 8.2 per cent a year ago, which is the slowest in five quarters, according to data released by the statistics ministry on August 30.

According to reports, the CEA said the demand side grew at a faster pace than GDP due to investment demand and business sentiments. However, the share of Gross fixed capital formation (GFCE) by the government has come down, he added.

A slight slowdown is anticipated due to slower capex and overall spending by the govt on account of elections. Both the services and manufacturing sectors have performed well, Nageswaran noted.

Speaking on inflation, the CEA stated that it was declining. The food inflation has declined sharply and the core inflation has not shown any spillover from food inflation.

The CEA reportedly acknowledged that the monsoon was a deficit in a few regions and that agriculture will recover in the upcoming quarters.

The agriculture sector reported growth of 2% in the April-June quarter of the current fiscal year which went from 3.7% in the same period in FY25, according to data released by the statistics ministry. However, the manufacturing sector gained momentum, with growth rising to 7% in the April-June quarter, compared to 5% in the previous year.

The Reserve Bank of India (RBI) revised its growth estimates for the April-June quarter downwards by 20 bps to 7.1% in the recent monetary policy committee meeting. The RBI attributed slow growth to limited government capex, lower corporate profitability, and lower core output. However, the central bank maintained the full-year FY25 GDP growth estimates at 7.2%.