Low GDP growth: Don't throw baby out with the bathwater, urges CEA

Speaking at Assocham's Bharat@100 Summit, CEA V Anantha Nageswaran emphasised that India's underlying growth story remains intact despite dismal Q2 GDP figures

Chief Economic Advisor (CEA) V Anantha Nageswaran has cautioned against "overinterpreting" the dismal Q2 GDP figures, emphasising that India's underlying growth story remains intact amid global uncertainties.

 

Speaking at Assocham’s Bharat@100 Summit on Thursday, Nageswaran said: "In view of Q2 GDP of 5.4 per cent, we should not throw the baby out with the bathwater, as the underlying growth story remains intact."

 

Nageswaran’s remarks come after India's economy slowed to a seven-quarter low of 5.4 per cent in the July-September quarter, impacted by poor performance in the manufacturing and mining sectors as well as weak consumption. The government remains optimistic that growth will pick up in the second half of the current fiscal, aiming to meet the 6.5-7 per cent GDP growth projected in the Economic Survey.

 

'Don't overinterpret GDP numbers'

 

According to the CEA, the drop in GDP numbers "should not be overinterpreted," pointing to global uncertainty stemming from ongoing military conflicts that have disrupted supply chains.

 

Nageswaran stressed that the global environment is not conducive for India’s growth and that New Delhi will need to "pull all domestic levers for growth."

 

He also reiterated his view on food items’ impact on inflation. "Some specific food items contributed to a sharp rise in inflation, but these were confined to a small percentage of the overall Consumer Price Index (CPI) basket of goods and services," he noted.

 

All eyes on RBI's MPC meeting

 

India’s GDP fell to a surprising 5.4 per cent in Q2 FY24, the lowest since Q3 FY23. This figure represents a sharp decline from 8.1 per cent in the same period last year and 6.7 per cent in Q1 FY25.

 

Attention now turns to the Reserve Bank of India’s Monetary Policy Committee (MPC) meeting on Friday. The central bank may lower the repo rate, which has remained steady at 6.5 per cent since February 2023 due to concerns over premature rate cuts.

 

The RBI may also consider a reduction in the cash reserve ratio (CRR), the minimum deposit required to be held by commercial banks as reserves with the central bank. Reports suggest that the RBI could announce a CRR cut even if the repo rate remains unchanged.