Finance Minister Nirmala Sitharaman Sees Better GDP Growth In Q2, Q3 As Capex Picks Up

India's GDP is likely to grow at a sharper rate in the second and third quarters as the government's capital expenditure has picked pace following the general elections, Finance Minister Nirmala Sitharaman said on Monday.

The GDP growth rate slowed to 6.7% in the quarter ended June 2024, after averaging over 8% in fiscal year 2024. The decline, said Sitharaman, was linked to the election-related constraints on expenditure.

"Because of elections, the capital expenditure plans announced didn't find much expenditure happening in Q1, because every department was looking at the post-election time," Sitharaman said while speaking at a News18 event. "As a result, a large part of the influence or impact that could have been had with public expenditure was muted."

However, expenditure is "picking up during Q2 and Q3," which will trigger the GDP to move faster, she added.

According to the finance minister, the government is on track to meet its fiscal deficit target of 4.5% of the GDP, set for the next fiscal.

Commenting on the benchmark lending rates, which have been left unchanged by the RBI since February 2023, Sitharaman said the central bank is doing a "thorough analysis" before taking a call. The government expects them to look at the overall economy, including inflation and growth, she added.

Sitharaman said the government is committed to reforms, and the move towards the simplification of direct and indirect taxation is aimed at helping the middle class.

The minister pointed out that nearly 70% of the taxpayers have already switched to the new tax regime, which offers lower taxation rates but fewer deductions.

For further reforms in indirect taxation, ministerial panels have been formed to suggest rationalisation of rates. "The Group of Ministers is working. There are two things—one, to bring the rates down and further simplify it, and to put essential goods into one category, which is the lowest," she said.

Sitharaman appealed market participants to "exercise caution" in terms of speculative trades, and take careful decisions with their life savings.

"There needs to be a sense of caution in our minds, and we also need to make sure that people with their savings don't go to high fluctuating and high-risk ventures," she said.

The minister also called for the need to use "authentic financial information" before taking a call in market trades.