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India economic growth slows to 7.1%
MUMBAI, Dec 1, 2018 (BSS/AFP) – India’s economic growth slowed to 7.1
percent in the second quarter, official data showed Friday, as its banks
endure a liquidity crunch that is hampering investment in Asia’s third-
largest economy.
GDP expansion missed the rate experts say India must consistently hit if
Prime Minister Narendra Modi, up for re-election next year, is to fulfil his
pledge of creating millions of jobs.
Central Statistics Office figures showed GDP growth for July to September
of the 2018-19 financial year slowed from 8.2 percent in the previous
quarter.
Despite the slowdown, the latest figures were up from 6.3 percent for the
same period last year and reinforce India’s status as one of the world’s
fastest-growing economies.
However analysts say the country needs to regularly record growth of at
least eight percent to generate employment for the millions of Indians who
enter the workforce every year.
“India needs to grow at eight percent or over for several years,” Ashutosh
Datar, an independent economist based in the commercial capital Mumbai, told
AFP.
“Any fall in GDP figures below this will have very significant
ramifications for the economy.
“And anything below seven percent would potentially hamper job creation
and also be undershooting our growth potential,” he added.
– Business-friendly –
Modi was swept to power in 2014 on a business-friendly manifesto that
included a pledge to create 10 million jobs a year.
India does not release officials jobs data but the opposition Congress
party accuses the government of failing to meet the target and is making an
issue of it ahead of a general election expected in April or May.
“These GDP figures are a sign of the government’s performance before next
year’s general elections and an indicator of the mood of the economy,” said
Sujan Hajra, an economist at Anand Rathi securities.
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“Any fall in the numbers will increase scrutiny and dent the public
perception,” he added.
Business sentiment has been hit by a credit squeeze sparked by a series of
defaults by debt-laden IL&FS, a non-banking financial institution that is
responsible for huge investment in infrastructure projects.
The defaults have shone a spotlight on India’s “shadow banks” and led to
billions of dollars in loans drying up.
They are also reportedly the source of a dispute between the government
and India’s central bank, the Reserve Bank of India (RBI).
The finance ministry has been pushing the RBI to ease lending norms at
mainstream commercial banks to boost loans for small businesses and also help
meet shortfalls caused by the near collapse of IL&FS.
India’s quarterly growth fell as low as 5.6 percent in mid-2017 as the
economy reeled from a shock cash ban that scrapped 86 percent of currency
notes and a new nationwide goods and services tax.
BSS/AFP/HR/0955