Govt Subsidies Are A Concern, May Impact GDP: RBI Governor

The Reserve Bank of India (RBI) Governor Shaktikanta Das said on Wednesday that capital expenditure spending of the centre and states is picking up but high subsidy outgo is a concern. Das was speaking at the BFSI Summit organised by a business daily in Mumbai. He said subsidy outgo was very high and government expenditure in the first quarter is pulling down the gross domestic product (GDP) numbers.

"Government expenditure has started picking up. Both revenue and capital expenditure of the Centre and states have started picking up. Subsidy outgo remains an issue," said the Governor. In the July-September quarter, he said payment towards subsidy of the general government has gone up.

The government has budgeted Rs 2,05,250 crore for food subsidies in FY25. This is a 3 per cent decrease from the revised estimate of Rs 2,12,332 crore for 2023-24. It has also provided for nutrient-based fertiliser subsidy for the Rabi season at Rs 24,475.53 crore. Indian economy grew 6.7 per cent in the April-June quarter, lower than RBI's 7.1 per cent forecast.

The next release of GDP estimates for the quarter July-September of 2024-25 (Q2 2024-25) will be on November 29. Das said higher subsidy outgo will have an impact on GDP numbers. "So that will have some impact, you know, which may have a negative impact on the GDP number. But down the line, I think economic activity remains quite robust," said the Governor.

The RBI has pegged India's 2024-25 GDP growth at 7.2 per cent. International Monetary Fund (IMF) and World Bank have pegged it at 7.0 per cent. Many global rating agencies and multilateral organisations have also revised their growth forecasts for India upwards. The Economic Survey tabled in Parliament earlier this year "conservatively" projected India's real GDP growth at 6.5-7 per cent for 2024-25, acknowledging that market expectations are higher.

Real GDP growth is the reported economic growth adjusted for inflation. India's GDP grew by an impressive 8.2 per cent during the financial year 2023-24, continuing to be the fastest-growing major economy. The economy grew by 7.2 per cent in 2022-23 and 8.7 per cent in 2021-22. (ANI)