'Slowdown structural, not cyclical'

This is an exciting time for people as budgets always create a buzz, particularly around taxation, but there are broader aspects such as fiscal deficit management, inflation, and geopolitical uncertainties. These are crucial for sustaining economic momentum and financial stability.

- SABYASACHEE DASH

India's GDP growth has slowed, inflation concerns persist, and global uncertainties, including geopolitical tensions, pose challenges. SABYASACHEE DASH speaks to the former Governor of the Reserve Bank of India, Dr. D SUBBARAO, to get insights on taxation, public spending, investment revival, and structural reforms. Dr. Subbarao is an Indian economist and former civil servant who served as the 22nd Governor of the Reserve Bank of India (2008-2013). He previously served as Finance Secretary and played a key role in managing India's policies during the 2008 Global Crisis. He is an alumnus of IIT Kanpur, Ohio State University, and MIT Sloan School of Management.

Q: Post-COVID, India's recovery plan has been praised. However, the economic slump to a seven-quarter low of 5.4 per cent GDP growth in Q2 has raised concerns. What, in your view, are the main causes of this slowdown?

A: The slowdown in GDP growth to 5.4% in Q2, down from 6.7% in the previous quarter, is concerning. The NSO projects full-year growth at 6.4%, down from 8.2% in FY24. Opinions are divided on the causes of this slowdown. Some experts attribute it to cyclical factors, including a reduction in public infrastructure spending due to elections and global uncertainties that have impacted export demand and increased import prices. According to this view, the slowdown is temporary, and once elections are over and global conditions stabilize, growth will rebound.