India’s economic slowdown calls for a well-crafted response
Subscribe to enjoy similar stories. Poll managers in the BJP must be heaving a sigh of relief: the underwhelming gross domestic product (GDP) data for the July-September 2024 quarter has been released well after the Maharashtra assembly polls were done and dusted. Logging disappointing year-on-year growth of 5.4%, the GDP data print for the second quarter of 2024-25 is not only much below consensus estimates from leading economists and analysts, but also offers a contrast from the economic narrative presented by top bureaucrats and economic administrators.
While there is no saying if it would have affected the poll outcome in Maharashtra, where a BJP-led coalition won handsomely, news of a slowdown often has a way of acquiring contagion characteristics, countering feel-good messaging or negating the income effects of political handouts. Bad news always travels faster, and, given the eroding credibility of the political class, people are more inclined to lay great store by negative developments than accept news of progress at face value. The GDP print confirms some major apprehensions.
The immediate anxiety stems from a slowdown on the demand side: both consumption and investment demand growth were listless this quarter, confirming suspicions of a structural decline. While private final consumption expenditure has grown 6% year-on-year, it masks the fact that in absolute terms the quarter is below both the third and fourth quarters of 2023-24. Seasonality apart, consumption data over the past 12 quarters has remained largely range-bound, with only minor variation between quarters.
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