Three years ago, India’s economic growth was about 9%. Now the growth rate has fallen heavily to just half that.
In the July to September quarter, India’s GDP grew by just 4.5%, which is the lowest level since early 2013. In the same period last year, the gross domestic product rate was at 7% and 5% in the previous quarter.
For six consecutive quarters, the economic growth has slumped, which can be partly associated with the recent shortcomings of India’s factories. The manufacturing sector which had a growth of 6.9% last year shrank to 1% in the last quarter. The agricultural growth rate was almost cut in half.
The GDP figure recorded is the weakest under PM Narendra Modi, who was elected 5 years ago by promising to take the Indian economy to greater heights and create hundreds of thousands of jobs each year.
Troubles have dawned upon Asia’s third-largest economy in the last year. The automotive sector has scraped several hundred thousands of jobs, and retail goods companies like Unilever have begun to cut down the prices because of slowing demand.
After winning re-election in May, Prime Minister Narendra Modi and his government have jostled to improve the economy. Some of the measures are relaxed regulations, cheaper car and home loans and no tax breaks for startups.
Interest rates have also been cut by The Reserve Bank of India and, it is likely to act again shortly.
In a research note, Capital Economics said that a strong rebound in the near term appears unlikely and hence there is a high chance that the rate cut is certain next week and will be followed by another in February.