India’s economy slows more sharply than expected as manufacturing activity slows
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It was the slowest growth in gross domestic product in seven quarters and well below a 6.5 per cent expansion projected by a Reuters poll and the central bank’s estimate of 7 per cent.
PHOTO: REUTERS
NEW DELHI – India’s economy slowed much more than expected in July-September, expanding by only 5.4 per cent year on year as growth in manufacturing and consumption decelerated, data showed on Nov 29.
It was the slowest growth in gross domestic product (GDP) in seven quarters and well below a 6.5 per cent expansion projected by a Reuters poll and the central bank’s estimate of 7 per cent.
Economists said private consumption, accounting for 60 per cent of GDP, has been hit by slower urban spending due to higher food inflation, high borrowing costs and weak real wage growth, despite a recovery in rural demand.
Manufacturing activity slowed to 2.2 per cent growth year on year in July-September, versus 7 per cent growth in the previous quarter.
“The manufacturing sector appears to have taken the maximum beating,” said economist Upasna Bhardwaj at Kotak Mahindra Bank, estimating that full-year economic growth could be 6.2 per cent, much lower than the Reserve Bank of India estimates.
GDP growth in July-September eased from 6.7 per cent seen in the previous quarter.
India is still, however, among the fastest growing major economies with government officials forecasting a potential regaining of momentum in the second half of the fiscal year, helped by improved rural demand after a strong monsoon and a pick-up in government spending.
Agricultural output rose 3.5 per cent in July-September from a year earlier, up from 2 per cent growth in the previous quarter.
Private consumer spending rose 6.0 per cent in July-September from a year earlier, compared with 7.4 per cent in the previous quarter.
The gross value added (GVA), a measure of economic activity, saw a modest 5.6 per cent growth, easing from a 6.8 per cent increase in the previous quarter.
Indian government spending in real terms rose 4.4 per cent year on year in July-September, compared with a 0.2 per cent contraction in the previous quarter, data showed.
India’s finance and trade ministers have called for interest rate cuts, though the central bank is expected to keep policy rates unchanged next week, according to Reuters poll of economists, amid inflationary concerns.
The Reserve Bank of India has predicted GDP growth of 7.2 per cent for the fiscal year ending in March 2025, a forecast that some private economists have revised downward. REUTERS
