India’s economic growth eased more-than-expected to a five-year low in the March quarter on weaker consumption and demand, and was behind China’s pace of expansion for the first time in nearly two years.
Gross domestic product expanded 5.8 percent year-on-year in the March quarter, slower than the 6.6 percent growth seen in the previous quarter,data from the National Statistical Office showed Friday. The pace of growth was slower than the 6.3 percent rise economists had forecast.
The agency revised down the growth rate for the 2018-19 financial year ended March to 6.8 percent from 7 percent.
The latest pace of quarterly growth was the weakest since 2014-15 and behind China’s March quarter expansion of 6.4 percent, which was the same as in the previous three months.
Separate official data released on Friday showed that the country’s unemployment rate was 6.1 percent in 2017-18. This confirmed figures leaked to the Business Standard newspaper earlier in this year, which claimed that the rate was at a 45-year high.
The sharp slowdown presents a major challenge to the pro-business right-wing Prime Minister Narendra Modi, whose government returned to power for a second term.
Earlier on Friday, former defence minister Nirmala Sitharaman was named the new finance minister.
Year-on-year growth in investment plummeted to 3.6 percent from 10.6 percent and private consumption growth slowed to 7.2 percent from 8.4 percent.
“The sharp drop in GDP growth in Q1 looks all the more perplexing given that various other indicators suggest a much milder slowdown last quarter,” Capital Economics economist Shilan Shah said.
“Nevertheless, the data will seal the deal on another rate cut next week, and increase the odds of fiscal loosening too.”
In April, the Reserve Bank of India had cut interest rates for a second straight session shortly before the country headed into a general election.
The bank had trimmed the GDP growth projection for 2019-20 to 7.2 percent from 7.4 percent.
The production-side breakdown of GDP showed that farm output fell 0.1 percent, while mining and quarrying expanded 4.2 percent and manufacturing output climbed 3.1 percent.
Electricity, gas, water supply and other utility services advanced 4.3 percent. Construction logged an annual growth of 7.1 percent.
Further, trade, hotels, transport and communication grew 6.0 percent, financial, real estate and professional services rose 9.5 percent, and public administration, defence and other services by 10.7 percent.
The economy expanded 6.8 percent in the fiscal year ended March 2019, which was revised down from 7 percent.
The June quarter GDP data is due on August 30.
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