India’s Economic Growth Slows Amid Election Spending Decline

India's economic growth slowed to 6.7% year-on-year in the April-June quarter, attributed to a decline in government spending during national elections. Despite the slowdown, India remains the fastest-growing major economy. Economists predict recovery due to easing inflation and a pickup in government spending.

India's economic growth decelerated to 6.7% year-on-year in the April-June quarter, primarily due to reduced government spending during national elections, official data revealed on Friday. This figure, though lower than the 6.9% forecast by a Reuters poll, still positions India as the fastest-growing major economy globally, surpassing China's 4.7% growth.

The slowdown is expected to be temporary, with economists forecasting recovery driven by easing inflation and an increase in government spending. Political uncertainty during the election period also negatively impacted investment and consumption. Despite the GDP slowdown, Gross Value Added (GVA) grew by 6.8%, highlighting underlying economic stability.

Chief economist Upasna Bhardwaj from Kotak Mahindra Bank noted that while GDP growth was softer than anticipated, the non-farm sector remained robust. The central bank projects a 7.2% growth for the full fiscal year, although this is a decline from the previous year's 8.2%, affected by reduced state spending and tightened retail loan regulations. The government's $576 billion annual budget aims to stimulate economic activity and address job creation challenges.