Reduction in GDP growth due to reduction in government spending and MCC: RBI Governor

Reserve Bank of India (RBI) Governor Shaktikanta Das addressing the Global Fintech Fest (GFF) 2024 in Mumbai on Friday. | Photo credit: ANI

India’s growth rate slows down Economic growth rate at 15-month low of 6.7% RBI Governor Shaktikanta Das said here on Saturday (August 31, 2024) that inflation in the April-June quarter was caused by a “low” growth in government spending in view of the Model Code of Conduct coming into force for the recently held Lok Sabha elections.

The RBI had projected a growth rate of 7.1% for the April-June quarter of this fiscal year.

“The Reserve Bank had projected a growth rate of 7.1% for the first quarter. However, the first advance estimate data released by the National Statistical Office showed the growth rate at 6.7%,” Mr Das told reporters here.

He said the components and key drivers of GDP growth such as consumption, investment, manufacturing, services and construction recorded a growth of over 7%.

The RBI governor said only two aspects have pulled the growth rate down slightly – government (both central and state) expenditure and agriculture.

He said government expenditure was low during the first quarter, probably due to the elections (April to June) and the implementation of the Model Code of Conduct by the Election Commission.

“We expect government expenditure to increase in the coming quarters and provide the required support to growth,” Mr Das said.

Similarly, the agriculture sector has recorded the lowest growth rate of around 2% in the April to June quarter. However, the monsoon was very good and spread across India except a few areas. Therefore, everyone is optimistic and positive about the agriculture sector, he said.

“Under these circumstances, we are reasonably confident that the annual growth rate of 7.2% projected by the RBI will be realised in the coming quarters,” the Governor said.