Q2 growth a temporary blip; India to see recovery soon, says FM

Finance Minister Nirmala Sitharaman today said the gross domestic product (GDP) growth trend witnessed in the second quarter of the current financial year is a “temporary blip” and the economy will see growth in the coming quarters.  Sitharaman says the blip in the economy has to be understood in the broader context as the regular budget was passed only in August and once the announcements, including capital expenditure, start taking shape on ground, the growth will pick up.

“Government believes that the GDP trend seen in Q2, 2024-25 is only a temporary blip and the economy will see health growth in the next quarters,” said Sitharaman during her reply to the debate on the first supplementary demand for the grant. The government has sought the parliament’s approval for an additional expenditure of ₹87,762 crore, involving a net cash outgo of ₹44,142.87 crore.  

Sitharaman said the average growth of the Indian economy in the last three years has been outstanding. “The real growth rate in Q1 and Q2 of this financial year has been 6.7% and 5.4%, respectively. At 5.4%, the Q2 rate is slower than expected. Many members observed this and raised doubt on whether the growth is sustainable. Q2 has been challenging for India and most economies of the world. In the last three years, India’s GDP growth has averaged 8.3%. This is outstanding,” Sitharaman said.  

“You can compare this number with rest of the globe and this number is outstanding by global standards. India is the fastest growing economy in the world and the credit goes to the people of India who are struggling and fulfilling their aspirations thereby contributing to the economy. And the leadership puts policy upfront responding to their aspirations. The two wheels have moved adequately in synchrony which you see in the growth numbers,” She added.  

Sitharaman also pointed out that the GDP trend is in line with election years in the past. "The regular budget was passed by the newly constituted Lok Sabha post-parliamentary elections in the middle of August 2024. Effectively, the implementation of the new announcements of this government commenced after the Appropriation Act was passed by the parliament in August 2024. Effectively, it is from August that we have started to give emphasis to many of things, including capital expenditure,” she added.  

“Therefore, we are now talking fourth months after the presentation of the regular budget. The situation is no different from the earlier years when the parliament elections were conducted. That is very important consideration which I would like the hon’ble members to take on board. When Lok Sabha elections happen, those years do have a certain flow of resources. The blip in the economy has to be understood in a broader context,” she added.

“Out of the twelve quarters in the last three years, the GDP growth rate was lower than 5.4% in two quarters. Q4, 21-22, Q3, 2022-23. So it is important to understand that this drop happened in just two quarters in the last twelve quarters. Let us not pick that one and predict future. There has been sustained and steady growth,” Sitharaman said.