India’s economy slowed more than expected in the July-September period, growing just 5.4 percent year-on-year as manufacturing and consumption growth slowed, data showed on Friday.
This was the slowest GDP growth in seven quarters and well below the 6.5 percent expected in a Reuters poll and the central bank’s estimate of seven percent.
Economists said private consumption, which represents 60 percent of gross domestic product, was hurt by a slowdown in urban spending due to high food inflation, high borrowing costs and weak real wage growth despite a recovery in rural demand.
Manufacturing activity slowed to 2.2 percent on an annual basis in the period from July to September, compared to seven percent in the previous quarter.
GDP growth in July and September fell from 6.7% in the previous quarter.
However, India remains among the fastest growing major economies with government officials anticipating a possible restoration of momentum in the second half of the fiscal, helped by improved rural demand after a strong monsoon and a rebound in government spending.
Agricultural output rose 3.5% in July and September from a year earlier, up from 2% growth in the previous quarter.
Private consumer spending rose 6.0% in July and September from a year earlier, compared to 7.4% in the previous quarter.
Gross value added (GVA), a measure of economic activity, saw modest growth of 5.6%, down from a 6.8% increase in the previous quarter.
The data showed that Indian government spending in real terms rose by 4.4% year-on-year in the July-September period, compared to a contraction of 0.2% in the previous quarter.
India’s finance and trade ministers have called for lower interest rates, although the central bank is expected to keep interest rates unchanged next week, according to a Reuters poll among economists, amid inflationary fears.
The Reserve Bank of India has forecast GDP growth of 7.2% for the fiscal year ending March 2025, a forecast that some private economists have revised downward.
