Sitharaman Says Economic Activity To Likely Improve In Q3, Backed By Public Expenditure

In the first half of the current fiscal year, the government has spent 37.3 per cent of its capital expenditure target of Rs 11.11 lakh crore for the 2024-25 fiscal year (FY25)

Finance Minister Nirmala Sitharaman on Friday said that the slowdown in GDP growth in the July-September quarter was not systemic. The minister said that economic activity in the third quarter is likely to improve backed by better public expenditure.

Speaking at an event, Sitharaman said, “In the first quarter, the growth was 6.7 per cent. It is not a systemic slowdown. It is more of absence of activity on public expenditure, capital expenditure and so on...I expect Q3 to make up for all these. So, growth number is something which is not necessarily going to get badly affected,” reported PTI.

Notably, the GDP growth rate stood at 5.4 per cent in the second quarter, hitting a 7-quarter low. The minister further stated that India will continue to grow at the fastest pace next year and after. “Growth momentum was low in the first quarter due to general election and reduction in capital expenditure. This has had a bearing on the second quarter as well,” she explained.

In the first half of the current fiscal year, the government has spent 37.3 per cent of its capital expenditure target of Rs 11.11 lakh crore for the 2024-25 fiscal year (FY25).

These comments came right after the Reserve Bank of India cut down its growth forecast to 6.6 per cent for FY25, against the earlier estimate of 7.2 per cent. 

Sitharaman noted that other factors such as stagnant global demand have impacted export growth. She stated that the purchasing capacity of Indians is improving, ‘but within India, you also have concerns of wages saturating. We are quite seized of these factors which might have a play on India’s own consumption’.

“The finance ministry, in its Economic Survey for FY24, had estimated a GDP growth of 6.5-7 per cent for the current fiscal year. We have a Prime Minister who looks at opportunities in each of the challenges. During Covid-19, the challenge was seen as an opportunity for bringing in reforms. Five mini budgets were presented at that time, each of them giving relief, support and handholding on one hand and on the other making sure that small and overlooked pending reforms were taken,” she said.