India’s economic growth slowdown is ‘temporary blip’ – New Delhi

Finance Minister Nirmala Sitharaman has said that healthy expansion is expected despite a decline in GDP to a seven-quarter low

Indian Finance Minister Nirmala Sitharaman has commented on the recent slowdown in the country’s GDP growth, describing it as a “temporary blip.” She indicated that the government expects to see stronger economic performance in the upcoming quarters.

In a statement to the parliament on Tuesday, she noted that the GDP growth rate fell to 5.4% during the July-September quarter, marking a seven-quarter low. Sitharaman attributed this primarily to underperformance in the manufacturing sector and sluggish government capital expenditure. 

In contrast, GDP growth for the first quarter (April-June) of the current financial year was recorded at 6.7%. “The government believes that the trend in Q2 is only a temporary blip and the economy will see healthy growth in the next quarters,” she stated, adding that there is no widespread slowdown across the manufacturing sector. According to the latest government data, manufacturing growth declined to 2.2% in the second quarter, the slowest pace seen in six quarters.

During her address, Sitharaman highlighted the historical trend of slowdowns following general elections. She pointed out that the federal budget for 2024-25 fiscal was approved by parliament in mid-August, after the general elections were concluded and the new government was formed, leading to increased state expenditure afterward.

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Sitharaman claimed that the National Democratic Alliance government headed by Prime Minister Narendra Modi has managed price rises more effectively than the previous government. She compared inflation rates, stating that from 1999 to 2004, the government maintained a headline inflation rate of 3.9%, whereas the United Progressive Alliance government formed in 2004 and led by the Indian National Congress, currently the principal opposition party, saw the inflation rise to 5.6% and later spiking to 10.2%. 

Under the Modi administration from 2014 to 2024, Sitharaman reported that inflation has been controlled at 5.1%. The minister reiterated the government’s focus on tackling food inflation by building up reserves of essential items like cereals and pulses, along with distributing important food products.

S&P earlier forecasted 6.7% annual GDP growth for the country. According to government data, GDP expanded by 8.2% in fiscal year 2023-24 and 7.2% in the prior fiscal year, solidifying India’s position as the world’s fastest-growing major economy. The Modi-led government expects the country to become a nominal $10 trillion economy by the end of this decade.