RBI Guv Shaktikanta Das attributes India's Q1 GDP fall to EC model code of conduct, reduced spending; says 'growth story is intact'
economic growth decelerated to 6.7% in the April-June quarter of 2024, marking a 15-month low. This slowdown contrasts sharply with the 8.2% growth recorded in the same period last year. According to Reserve Bank of India (RBI) Governor Shaktikanta Das, the primary reason for this slowdown was reduced government spending due to the enforcement of the model code of conduct during the recent Lok Sabha elections.
Das noted, «The Reserve Bank projected a growth rate of 7.1% for the first quarter. However, the first advance estimation data released by the National Statistical Office (NSO) showed the growth rate at 6.7%.»
Impact of Reduced Government Spending
The lower-than-expected growth rate is largely attributed to decreased government expenditure during the election period. Das explained that both central and state government spending were constrained due to the model code of conduct, which is enforced during elections to ensure fair practices.
Das highlighted, «Only two aspects have pulled the growth rate slightly down. Those are government (both central and state) expenditure and agriculture.» He further stated, “We would expect the government expenditure to pick up in coming quarters and provide the required support to growth.”
Sector-Wise Performance
Despite the overall slowdown, core economic sectors performed robustly. Consumption grew by 7.4%, investment increased by 7.5%, and manufacturing saw a growth rate of 7%, compared to 5% in the previous year. The services sector grew by 7.7%, and construction
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