India’s economy slows more sharply than expected as manufacturing weighs
INDIA’S economy slowed much more than expected in July-to-September quarter, expanding by only 5.4 per cent year-on-year as growth in manufacturing and consumption decelerated, data showed on Friday (Nov 29).
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.
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-to-September period, versus 7 per cent growth in the previous quarter.
“The manufacturing sector appears to have taken the maximum beating,” said Upasna Bhardwaj, economist at Kotak Mahindra Bank, estimating that full-year economic growth could be around 6.2 per cent, much lower than the RBI estimates.
GDP growth in July-to-September quarter eased from 6.7 per cent seen in the previous quarter.
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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-to-September period from a year earlier, up from 2 per cent growth in the previous quarter.
Private consumer spending rose 6 per cent in July-to-September quarter from a year earlier, compared to 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-to-September quarter, compared to 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 (RBI) has predicted GDP growth of 7.2 per cent per cent for the fiscal year ending in March 2025, a forecast that some private economists have revised downward. REUTERS
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