NEW DELHI — India’s economy grew by a slower than expected 7.0% 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% year-on-year from 7.5% 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% 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.”
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 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.
Modi also announced on Sunday that 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 plunged last week, along with those of other emerging markets, on fears that China’s economic slowdown is worse than expected, and as the U.S. Federal Reserve prepares to move on interest rates.
Monday’s figures come after India’s central bank kept interest rates on hold earlier this month, 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% was “not that bad” given the government’s need to pick up the pace of reform and the fact new investments were sluggish.
The figures showed manufacturing, hotels, financial and insurance services, and real estate were among sectors that grew more than 7.0%, while agriculture and mining were among those well below 7.0%.
The numbers were the latest Gross Domestic Product data to be released since the government introduced a revised formula for calculating GDP that some analysts have criticized.
India’s government changed the way it calculates GDP in January, saying the new method was closer to international standards.
The main change is that India now measures its economic growth at market prices to incorporate “gross value addition” in goods and services, as well as indirect taxes.
The base year to calculate India’s GDP has also been advanced to 2011-12 from 2004-05. But analysts say the new data does not correlate with some other economic indicators, including last year’s industrial production figures and corporate profits.
Copyright Agence France-Presse, 2015