India's Q2 GDP Slowdown A Temporary Blip, Says Nirmala Sitharaman

Finance Minister Nirmala Sitharaman described on Tuesday the lower-than-expected growth in the gross domestic product in the September quarter as a "temporary blip".

During a debate on the first batch of Supplementary Demands for Grants in the Lok Sabha, Sitharaman expressed confidence that the Indian economy would experience strong growth in the upcoming quarters, even as it continues to be the fastest-growing major economy in the world.

The minister highlighted that India has experienced "steady and sustained" growth, with an average GDP growth rate of 8.3% over the past three years.

"The real growth rate for first quarter and second quarter of this financial year 2025 has been 6.7% and 5.4% respectively. At 5.4%, the second quarter rate is slower than expected and it has been a challenging quarter for India and most other economies of the world," she said.

The finance minister said there was no broad-based slowdown in the manufacturing sector. Half of the sectors within the overall manufacturing basket continue to remain strong.

"A generalised slowdown in manufacturing is not expected as it is restricted to a few segments," she said. "Out of the 23 manufacturing sectors in the Index of Industrial Production, about half of them remain strong even now."

Besides, she said, the capital expenditure of the Union government has grown 6.4% between July and October 2024. The government has allocated Rs 11.11 lakh crore toward capex during the current financial year.

"I think steps that we are taking to push for growth and to sustain growth are going to this route of capital expenditure so that the multiplier effect will spread through the economy and therefore give a greater traction," Sitharaman said.

For every rupee spent on the capital account, she said, the multiplier effect sometimes results in touching 4.3, whereas if you spent on the revenue account, for every one rupee, you would get only 0.98.

The Lok Sabha passed Supplementary Demands for Grants, seeking approval of additional net expenditure of Rs 44,143 crore in the current fiscal, mainly on account of higher spending by agriculture, fertiliser and defence ministries.

The additional spending comprises Rs 6,593.7 crore for the fertiliser subsidy scheme, approximately Rs 9,000 crore for agriculture and farmer welfare, and Rs 8,000 crore for defence spending. Moreover, Rs 3,000 crore has been allocated for the Ministry of External Affairs, while the Ministry of Home Affairs will receive Rs 4,800 crore.

The first batch of Supplementary Demands for Grants for 2024-25 sought approval to authorise gross additional expenditure of Rs 87,762.6 crore.

(With PTI inputs)