India's GDP growth slows to 5.0%

NEW DELHI: India’s economy expanded at its weakest pace in more than six years in April-June, as consumer demand and private investment slowed at a time when global trade frictions have dampened business sentiment.

Asia’s third-largest economy grew at a slower-than-expected 5.0% in the latest three-month period, compared with 5.8% in the previous quarter, government data showed on Friday.

For the same three months, China reported annual economic growth of 6.2%.

A Reuters poll of economists had forecast annual gross domestic product growth of 5.7% for the latest quarter. In the same period of 2018, India’s growth was 8%.

Analysts expect India’s economic slowdown could continue for the next two three years as the economy faces serious structural issues, hurting consumer demand and manufacturing.

“The government needs to address structural and cyclical issues to address the economic slowdown,” said Devindra Pant, chief economist of India Ratings, an arm of Fitch Ratings, citing a slowdown in the sales of autos and construction and a dip in consumer demand.

The growth numbers could prompt the Reserve Bank of India’s monetary policy committee to cut interest rates by at least 25 basis points in October. So far this year, it has cut the benchmark repo rate by 110 basis points.

The central bank has shown willingness to join hands with the government to try to revive consumer demand and investments because inflation remains below its 4% medium-term target for a year.

In its annual report, the RBI said on Thursday that reviving consumption demand and private investment – the highest priority – would need a big push for spending on infrastructure and adoption of structural reforms, including labor laws, taxation, and legal reforms, to ease the path for business in India.