Q2 GDP growth slowdown a temporary blip: FM Sitharaman

India’s GDP growth slipped to a seven-quarter low of 5.4% during the July-September quarter largely due to poor performance of the manufacturing sector and sluggish government capital expenditure.

New Delhi: The slowdown in India’s gross domestic product (GDP) growth during July-September quarter was a “temporary blip” and the economy is expected to see healthy expansion in the coming quarters, Finance Minister Nirmala Sitharaman said on Tuesday.

“At 5.4 per cent, the Q2 rate is slower than expected. The quarter two of this financial year has been a challenging quarter for India and for most of the economies of the world,” Sitharaman said while replying to a debate in the Lok Sabha.

India’s GDP growth slipped to a seven-quarter low of 5.4 per cent during the July-September quarter largely due to poor performance of the manufacturing sector and sluggish government capital expenditure. In the first quarter of FY25 (April-June), GDP growth stood at 6.7 per cent.

“The government believes that the trend in Q2 is only a temporary blip and the economy will see healthy growth in the next quarters,” Sitharaman said, adding that there was no broad-based slowdown in the manufacturing sector.

“Out of 23 manufacturing sectors, about half of them remain strong even now. So I am very optimistic about the performance going further and going forward,” she added.

Manufacturing sector growth slumped to 2.2 per cent in Q2, the slowest pace in six quarters, as per the latest National Statistics Office (NSO) data released on November 29.

Sitharaman said that there has been a trend of growth slowdown in the quarters following general elections. She pointed out that the Union Budget 2024-25 was approved by the Parliament in the middle of August and thus the government expenditure started effectively after that. This situation is no different from the earlier years when Lok Sabha elections were conducted, she added.

On inflation, Sitharaman claimed that the National Democratic Alliance (NDA) government has managed price rise better than the erstwhile United Progressive Alliance (UPA) government.

She pointed out that during 1999 to 2004 (NDA government led by Atal Bihari Vajpayee), the headline inflation was controlled at 3.9 per cent, while during the UPA-1(2004-2009), inflation surged to 5.6 per cent. Under UPA-2 (2009-2014), it spiralled to 10.2 per cent “representing a catastrophic failure to control rising prices,” the Finance Minister said.

On inflation during the Modi government, Sitharaman said it has been controlled at 5.1 per cent in the 2014-2024 period.

However, she underscored that the government is committed to better managing food inflation through steps such as building buffers in key food items like cereals, pulses, and distribution of onions, rice, tur dal and wheat flour.

Sitharaman claimed that the unemployment rate has come down from 6 per cent in 2017-18 to 3.2 per cent now.