GDP dent disappointing, but not alarming; no stagflation in India: CEA

Chief Economic Adviser V. Anantha Nageswaran today said the dip, seen in India’s GDP growth in the second quarter of the current financial year, is disappointing, but not alarming as a couple of bright spots in the economy are also visible. He expressed optimism about economic growth rebounding in the second half of the fiscal and emphasised that India is not experiencing stagflation.

“We understand that the real GDP growth of 5.4% in Q2, FY25 is on the lower side. It is disappointing, but not alarming as there are some bright spots. The global environment was challenging, which must have had an impact on Indian manufacturing,” said Nageswaran.

Nageswaran pointed out that construction and agriculture have performed well. “Construction is a bright spot. It has been growing in the high single digits. The economy is resilient when it comes to agriculture. Kharif production has been very high. There are higher MSPs. The pickup seen in the last two quarters is expected to continue,” said Nageswaran.

The CEA pointed to several factors affecting the country's manufacturing growth. “Bulk of the slowdown in the Q2 from the supply side is attributed to manufacturing and quarrying sectors. Coal, natural gas, and crude oil constitute 50% of the mining, and (these) have been tepid. There is also an impact of the global supply chain disruption. Geopolitical risks and trade uncertainties spiked impacting the global supply chain and demand conditions. There is a shadow from the global spillover in manufacturing,” Nageswaran added.

Nageswaran said growth in the country is expected to come back in the second quarter of the current financial year. On inflation, Nageswaran pointed out that inflation in general apart from food prices, has been on the lower side. There has been concerted action from the government to keep food inflation as minimal as possible. Various policy measures have been taken in the last couple of years to maintain food availability.