"Double Down On Deregulation": Here's What CEA V Anantha Nageswaran Said On India's Q2 GDP Figures

Chief Economic Adviser V Anantha Nageswaran has stressed the importance of deregulation and structural reforms after India’s economic growth slowed for a second consecutive quarter.

He attributed the GDP slowdown in the second quarter to a combination of global issues such as surplus manufacturing capacity in other regions and import dumping in India.

Nageswaran noted that despite the disappointing GDP figures, the situation offers an opportunity to focus on key structural reforms.

“It is a good moment to reassess not only hiring and compensation practices in the private sector but also to double down on deregulation,” Nageswaran said.

“Additionally, this is an ideal time to strengthen state capacity for public investment, shifting focus from revenue expenditure to long-term growth-enhancing initiatives," he added, Livemint reported.

Nageswaran acknowledged that domestic structural factors played a role in the slowdown but emphasised the need to also consider the role of special factors.

“Urban demand slowdown could have been influenced by factors like reduced footfalls due to monsoon activity and the observance of religious events," the CEA said.

At a press conference following the release of Q2 GDP data, Nageswaran highlighted that geopolitical uncertainties, including those linked to the US presidential election, intensified during the quarter, further contributing to economic uncertainties.

Nageswaran noted that these global and geopolitical factors amplified the growth slowdown.

"In India, it is evident in the divergence between rising steel consumption and stagnant steel production,” he said, highlighting the challenges faced by the domestic manufacturing sector.

He expressed optimism about stronger growth in the latter half of the ongoing financial year.

India's GDP growth fell 270 basis points year-on-year to 5.4 per cent in Q2 FY25 (July-September).

The slowdown was primarily driven by a contraction in manufacturing and weaker private consumption.

According to Ministry of Statistics & Programme Implementation (MoSPI) data released on Friday (29 November), GDP growth declined by 130 basis points from 6.7 per cent in the April-June period.

Despite the slowdown, India remains among the fastest-growing major economies.

The Finance Ministry expects a rebound in growth in the second half of the fiscal year, driven by strong rural demand post-harvest and increased government expenditure.

Nageswaran stressed the need to address the barriers hindering capital formation.

“Some of this could be attributed to excessive rainfall in the second quarter and uncertainties surrounding the election season. However, there is significant potential for capital expenditure to ramp up in the remaining three to four months of the year," he said.

Gross Value Added (GVA), which measures the total value of goods and services produced in an economy, in Q2 FY25 grew 5.6 per cent, a drop from 7.7 per cent in the same period last year, and lower than 6.8 per cent in Q1.

Meanwhile, the Gross Fixed Capital Formation (GFCF), which indicates new value-added and investments in the economy, grew 5.4 per cent annually in Q2, down from 11.6 per cent a year ago and 7.5 per cent in Q1, showing a decline in investments.

He noted that developed nations are also turning to deregulation to stimulate economic growth.

“If we are to achieve our employment and manufacturing aspirations, and consequently boost capital formation and investment, we must double down on deregulation, especially at the state and local government levels,” he said.

“This approach will help shift both the trend and actual growth rates, potentially raising them from 6.5 per cent towards 7 per cent and beyond," he added.

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