Deregulation Poised to Spur Growth as Fiscal Drag Eases

The government is capable of supporting growth and exceeding deficit targets, said Mishra

- Rhik Kundu

India's growth headwinds from the central government's planned fiscal consolidation are easing, and the current economic slowdown appears cyclical, with the Centre's deregulation drive poised to spur growth, Neelkanth Mishra, chief economist at Axis Bank and head of global research at Axis Capital, said on Friday.

Speaking at the Mint India Investment Summit, Mishra said the government was capable of supporting growth and exceeding its deficit targets despite fiscal consolidation.

While government spending in 2023-24 was front-loaded, spending during this financial year has been back-loaded and could drive rapid growth in the final quarter, he added.

"It is clear that there was a major drag to growth during FY25, but its impact will ease going forward," said Mishra.

He added that further rate cuts may be less effective because the Reserve Bank of India has kept liquidity too tight for too long.

RBI kept its key interest rate unchanged at 6.50% for nearly two years, spanning 10 consecutive policy meetings since February 2023. In February this year, however, RBI introduced a 25 basis point cut, bringing the rate down to 6.25%.