India's GDP growth slips further to 4.5% amid slowdown

NEW DELHI • India's economy grew at its weakest pace in more than six years last quarter, a blow to Prime Minister Narendra Modi as he steps up action to stem the fallout.

Gross domestic product rose 4.5 per cent in the July to September quarter from a year ago, down from 5 per cent in the previous quarter. It matched a median estimate in a Bloomberg survey of economists.

Core infrastructure industries' output declined 5.8 per cent last month, the biggest contraction since at least 2005, data released separately showed yesterday.

"Today's weak print was well telegraphed, and while the Reserve Bank of India (RBI) did not project this kind of weakness, we do not think their view on growth trajectory will change materially," said Mr Rahul Bajoria, senior economist with Barclays Bank in Mumbai. "We expect the RBI to keep cutting rates."

The slowdown in Asia's third-largest economy took a turn for the worse this year as consumers curbed spending, businesses held back on investments and export demand slumped.

Having left much of the stimulus burden to the RBI early this year, Mr Modi has recently taken bolder steps to reverse the decline, though the policy room for additional stimulus is narrowing.

"Domestic demand is displaying chronic weakness, with an apparent credit crunch afflicting wide swathes of the economy," Dr Taimur Baig, chief economist at DBS Group Holdings in Singapore, said before the GDP data.

"Production and sales are under pressure, and public spending is running out of room due to poor tax collection."

In recent months, the government has slashed corporate taxes, set up a special real-estate fund, merged banks and announced the biggest privatisation drive in more than a decade. The central bank has already cut interest rates by 135 basis points this year to the lowest since 2009, with economists predicting more easing to come next week.

However, Delhi expects growth to recover as consumption and investments pick up.


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A version of this article appeared in the print edition of The Straits Times on November 30, 2019, with the headline India's GDP growth slips further to 4.5% amid slowdown. Subscribe