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Informist, Friday, Nov. 29, 2024

 

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--CEA Nageswaran: Will be very closely examining nominal GDP growth trend 
--CEA Nageswaran: Too premature to comment on growth rates for FY26, FY27 
--CEA: Enough reasons to believe Jul-Sept GDP data not start of a trend 
--CEA Nageswaran: Enough reasons to believe Jul-Sept GDP data a one-off 
--CEA Nageswaran: No stagflation in India, we are still growing 
--CEA Nageswaran: Capex growth will pick up, that is best hope 
--CEA Nageswaran on GDP data: These are 1st estimates, need to see full data 
--CEA: Banking liquidity now comfortable, should see better loan growth 
--CEA: Exports face greater uncertainty on possible policy changes elsewhere 
--CEA Nageswaran: Must be realistic about global scenario we'll face in 2025 
--CEA: Geopolitical conditions fragile, may keep impacting India inflation 
--CEA: Growth trends promising, but need to be aware about global context 
--CEA Nageswaran: Outlook for agriculture sector in Oct-Mar is favourable 
--CEA: Jul-Sept growth slowdown must be interpreted in right perspective 
--CEA Nageswaran: Jul-Sept growth slowdown was mostly anticipated 
--CEA Nageswaran: Bulk of slowdown in Jul-Sept attributable to mfg slowdown 
--CEA Nageswaran: Agri, construction bright spots in Jul-Sept GDP data 
--CONTEXT: CEA Nageswaran speaking post release of Jul-Sept GDP data 
--CEA Nageswaran: Jul-Sept GDP growth disappointing, but not alarming 
 

 

NEW DELHI – The sharp slowdown in GDP growth to a seven-quarter low of 5.4% in Jul-Sept is disappointing but not alarming, Chief Economic Adviser to the Government V. Anantha Nageswaran said Friday. The lower GDP growth print in Jul-Sept was mostly anticipated, Nageswaran said. The GDP growth in Jul-Sept was sharply lower than the consensus estimate of 6.5% and the Reserve Bank of India's projection of 7.0%.

 

"The bulk of the slowdown (in Jul-Sept) has been predominantly due to the manufacturing sector," Nageswaran told the media after the release of the GDP data. The manufacturing sector grew just 2.2% in Jul-Sept as compared to 14.3% a year ago.

 

Citing the example of the steel sector, Nageswaran said that the low growth in the manufacturing sector was partly due to excess capacity elsewhere and dumping in India. He said the slowdown in GDP in the September quarter should be interpreted from the right perspective - with respect to global developments. "There was a shadow or spillover from the global factors on domestic manufacturing."

 

Even with a lower than expected GDP growth, there were bright spots, like the growth in the farm sector and the construction sector, Nageswaran said. In fact, the outlook for the farm sector, which grew 3.5% against 1.7% a year ago, is favourable, he said. The construction sector, although lower than last year, showed the highest growth compared to other industrial sectors, he said.

 

While the government would also closely examine the nominal GDP growth in coming months, this is just the first set of data, the government's adviser said. The nominal GDP growth in Apr-Sept was 8.9%, against 10.5% assumed by the finance ministry in the Budget for the current year. A lower than expected nominal GDP growth could affect the fiscal maths for the year.

 

The government expects growth to pick up in the second half, Nageswaran said. "From October onwards, industrial activity continues to pick-up and is in the expansion zone." The banking sector has enough liquidity, so credit growth is expected to grow as well, he said.

 

The GDP grew 6% in Apr-Sept, compared to 8.2% in the corresponding period a year ago. The finance ministry, in its Economic Survey for 2023-24 (Apr-Mar), had projected a growth of 6.5-7.0% for FY25. As such, the economy needs to grow by 7.0-7.9% in Oct-Mar to meet the ministry's estimate. The Jul-Sept growth print is not a start of any trend but rather a one-off, and there are no reasons to believe that the growth will fall short of the projection, Nageswaran said.

 

"Capital expenditure may pick up, that is the best hope," Nageswaran said. This may push government consumption, which grew 4.4% in Jul-Sept. Till October, the government had spent only 42% of its capital expenditure target of INR 11.11 trillion for FY25. 

 

While the upcoming growth trend seems promising, there is a need to be aware of the global context, the economic adviser said. "Geopolitical conditions remain fragile and may continue to impact domestic inflation, supply chains and capital flows." But it is too premature to comment on the expected growth rates for FY26, and FY27, Nageswaran said.  

 

Alluding to the possible tariff measures by the US after President-elect Donald Trump assumes office in January, Nageswaran said that India's exports may face more challenges on account of policy measures elsewhere. "We must be realistic about the global scenario we'll face in 2025."  

 

Trump has proposed massive tariff hikes, especially on goods from Mexico, Canada and China. During campaigning, Trump had said his government would impose high tariffs on countries that have a trade surplus with the US. Trump had also called India, which had a trade surplus of $35.32 billion in FY24 with the US, a "tariff abuser".

 

There is no stagflation in the economy and India is growing, Nageswaran said.  End 

 

US$1 = INR 84.48

 

Reported by Krity Ambey

Edited by Saji George Titus

 

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