No clear picture on long-term effect of India's economic slowdown

CONTRASTING positions taken this month about India's future growth prospects by the top two rating agencies of the world, Moody's Investors Services and Standard & Poor's (S&P) have revived the question of whether Asia's third-largest economy has lost its way or is on track for stable, long-term growth.

Government data showed that India's GDP grew at 7.1 per cent in financial year 2016-17 ending March, slower than the 8 per cent recorded in the previous year. GDP growth in the April to June quarter, at 5.7 per cent, was the slowest pace of quarterly growth since the current government assumed office in May 2014.

There are several reasons for the slowdown. Key among them is the demonetisation of high-value currency notes in the last quarter of 2016 and the clumsy roll-out of the Goods and Services Tax (GST) in the second quarter of this year. The larger question is whether the slowdown is a temporary blip or symptom of a larger problem.