RBI Attributes Slow Economic Growth to Reduced Government Spending

The Reserve Bank of India (RBI) Governor Shaktikanta Das addressed the media on August 31, 2024, highlighting the factors behind India’s economic growth slowdown in the April-June quarter.

According to the RBI, the projected growth rate for this period was 7.1%. However, the actual growth rate fell to 6.7%, as reported by the National Statistical Office.

Governor Das pointed out that significant contributors to GDP growth, such as consumption, investment, manufacturing, services, and construction, all achieved growth rates exceeding 7%. Nonetheless, he indicated that government expenditure at both central and state levels, along with performance in the agricultural sector, were responsible for the lower growth rate.

Das mentioned that the decline in government spending during the first quarter may have been influenced by the Lok Sabha elections and the enforcement of the model code of conduct by the Election Commission.

Looking ahead, he expressed optimism that government spending would increase in subsequent quarters, thereby supporting the expected economic growth.

The agricultural sector experienced minimal growth of around 2% during this period. Das noted the favorable monsoon conditions across most parts of the country, which have generated a positive outlook for the agriculture sector.

With these factors in mind, Governor Das reiterated the RBI’s confidence in achieving the annual growth rate projection of 7.2% in the coming quarters.