India’s Q1 GDP growth disappoints at 7% versus 7.5% QoQ

31 Aug 2015 | Author: | No comments yet »

India’s economy grows slower than estimated.

New Delhi • India’s GDP grew slower than estimated, boosting pressure on Prime Minister Narendra Modi to make more progress in overhauling Asia’s third-largest economy.

Gross domestic product rose 7 percent April-June from a year earlier, after a 7.5 percent expansion the previous quarter, the Central Statistics Office said in a statement in New Delhi on Monday. Analysts polled by Reuters expected growth for the quarter to come in at 7.4 per cent, but a weak showing from the services sector acted as a drag on Asia’s third-largest economy. “Growth conditions are still weak and are picking up in a very, very gradual manner,” said Mr A Prasanna, economist at ICICI Securities Primary Dealership. While India has matched the growth rate in China, the loss of momentum comes just as Mr Modi’s image as the country’s economic saviour starts to fade 15 months after his historic electoral triumph. India’s currency and stocks plummeted last week along with other emerging markets on concerns that China’s slowdown would be worse than anticipated as the Federal Reserve prepares to raise interest rates.

He swept to power on a promise of speedier growth creating millions of manufacturing jobs, but businesses are getting restless with slow progress in removing barriers to growth. This week he stepped back from land reforms after opposition from farmers, and proposals to overhaul labor laws and implement a national goods-and-services sales tax face delays. “What is needed is to get the GST implemented as land reforms are tougher now,” Vishnu Varathan, a Singapore-based economist at Mizuho Bank said before the data, referring to the Goods and Services Tax. Some bu-reaucrats are already arguing for an immediate reduction of as much as 50 basis points in the Reserve Bank of India’s main 7.25 per cent policy rate. “In our view, it clearly paves the way for two more repo rate cuts before the close of the finan-cial year,” said HDFC Bank’s principal economist Jyotinder Kaur.

Many in the government are worried that growth could slip below the official target of 8 to 8.5 per cent for the year to March, and sees the RBI’s caution as worsening the situation. Since the nation exports little to China while benefiting immensely from lower commodity prices, India will be less impacted than other countries from developments in China, central bank Governor Raghuram Rajan said in an interview at Jackson Hole in the United States on Saturday. Asia’s third-biggest economy will expand 7.5 percent in the current year, compared with China’s 6.8 percent, an average 4.2 percent for emerging markets and 3.3 percent for advanced nations, the International Monetary Fund forecast in July. India overtook China as the world’s fastest growing major economy in the January-March quarter, expanding 7.5 percent compared with its larger rival’s 7 percent increase.

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