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India’s Q2 GDP numbers will be better than Q1 on govt spending: RBI governor

23 Sep 2019 Evaluate

Expressing confidence over growth of Indian economy, the Reserve Bank of India (RBI) governor Shaktikanta Das has said that second-quarter (Q2) Gross Domestic Product (GDP) numbers will be better than the previous one as the government has started spending again. Attributing the 5% GDP growth in Q1 to very low government spending, he said with the Centre opening its coffers again growth should pick up going forward.

He said in the first quarter the government expenditure, which has a major role in GDP numbers, was very low due to the elections, pulling down the growth numbers to some extent. From the second quarter government expenditure has been picked up. So, he said that second quarter numbers will be hopefully better than the first quarter.

For the first quarter, he said that the RBI analysis showed growth to be at 5.8% and all the surveys it did also projected growth to be in the range of 5.5-5.8% but the final print was much lower. He added ‘when it came in at 5% it was a surprise. That is perhaps due to conflicting signals in the economy. One month the PMI goes up, the next month it goes down. The IIP numbers have also been going up and down.’

Das also reiterated the possibility of more rate cuts if incoming data support such a move but warned against government initiating any fiscal expansion and said that it has no legroom to do so given the high deficit numbers. He also called for urgent structural reforms especially inland and labour as well as entrepreneurial areas. Besides, he welcomed the government announcement to slash corporate tax across the board and termed the same as bold moves which should benefit all sectors. In a major fiscal booster, the government had slashed effective corporate tax to 25.17% inclusive of all cess and surcharges for domestic companies.

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