India’s Economic Growth Chill

• The National Statistics Office (NSO) has confirmed concerns about India’s sluggish trajectory in its first GDP estimates for 2024-25.

• The first quarter hit public capital spending, while Q2 was marred by weak demand and underwhelming public capex, dragging GDP growth to a seven-quarter low of 5.4%.

• The Centre and the Reserve Bank of India (RBI) reduced their hopes to ‘about 6.5%’ and 6.6%, respectively, based on a 7% increase in the second half of the year.

• The NSO expects GDP to grow at a four-year low pace of 6.4%, from 8.2% in 2023-24.

• The Finance Ministry links the demand slowdown to a “combination of monetary policy stance and macroprudential measures by the central bank.”

• The NSO’s projection of gross fixed capital formation growth slipping to 6.4% this year indicates that private capex remains weak while public capex goals are unlikely to be met.

• The Union Budget 2025-26 needs to move from incremental tinkering to tailoring reforms and fiscal actions that can bring India’s growth back to the 7% mark, if not 8%, at the earliest.