India’s economy is running out of steam after the slowest growth for a decade in the first three months of the year, official figures showed today.
The nation, a member of the Bric club of emerging economies with Brazil, Russia and China, grew at an annual pace of 4.8 per cent in the first quarter. While impressive by Western standards, this is well below the 8 per cent growth averaged by the economy over the past 10 years.
Analysts fear that a mix of inflation, weak consumer spending and delayed economic reforms has dampened willingness to invest in the Indian economy, although Prime Minister Manmohan Singh expects the economy to pick up pace in the coming months.
Singh, whose minority coalition government is mired in corruption scandals and political gridlock, said: “We will see inflation coming under greater control and the space for growth-promoting activities also increasing.”
Manufacturers managed annual growth of 2.6 per cent in the March quarter. But mining contracted an annual rate of 3.1 per cent and growth in capital investment growth slowed to 3.5 per cent year on year. India’s central bank has cut its main interest rate by 75 basis points since January to spur recovery although Radhika Rao, an economist at DBS in Singapore, said the economy “lacks signs of a sustainable pick-up in momentum”.
Duvvuri Subbarao, governor of the Reserve Bank of India, has warned that upside risks to inflation and a high current-account deficit have limited room for more monetary easing even though economic growth remains weak.