India's economy grows by 7% in first quarter

India's economy grew slower than expected in the first quarter.
India's economy grew slower than expected in the first quarter.PHOTO: BLOOMBERG

NEW DELHI (AFP) - India's economy grew by a slower than expected 7.0 per cent in the first quarter, official figures showed Monday, adding to pressure on Prime Minister Narendra Modi to speed up efforts to boost growth.

Growth in the three months through June slowed to 7.0 per cent year-on-year from 7.5 per cent in the previous quarter, the statistics ministry data showed.

The figures for the first quarter of the financial year were lower than the median forecast of 7.4 percent in a survey of economists by Bloomberg News.

India's growth overtook that of regional economic powerhouse China in the first three months of 2015, prompting Finance Minister Arun Jaitley to announce the economy was in "recovery mode".

But analysts said the latest figures indicated the right-wing government's attempts to revive Asia's third largest economy were faltering.

"The GDP number shows that there is no take-off in any of the key sectors of the economy," Madan Sabnavis, chief economist at Care Ratings, told AFP.

"The high government spending which was expected to provide the boost is not being reflected in the numbers."

Mr Modi swept to power in May 2014 on a pledge to reform and revive the economy to help provide jobs for India's tens of millions of young people.

But many of Mr Modi's key economic initiatives including a national goods and services tax have stalled in parliament where his Bharatiya Janata Party (BJP) lacks a majority.

Mr Modi on Sunday also announced he was abandoning land reforms aimed at speeding up stalled multi-billion dollar infrastructure and other development projects, after mass opposition from farmers.

India's currency and stocks also plunged last week along with those of other emerging markets on fears China's economic slowdown is worse than expected and as the US Federal Reserve prepares to move on interest rates.

Monday's figures come after India's central bank earlier this month kept interest rates on hold, saying the country's economic recovery was still a "work in progress".

Reserve Bank of India governor Raghuram Rajan has snipped rates three times this year in a bid to kickstart lending and boost growth.

Arun Singh, senior economist at Dun & Bradstreet, said 7.0 percent was "not that bad" given the government's need to pick up the pace of reform and the fact new investments were sluggish.