Weak Industrial Output Persists Despite Government Action to Spur Indian Economy
Laborers work at the site of a commercial building under construction in Mumbai REUTERS
NEW DELHI: India’s economic growth decelerated in the third quarter, feeding doubts about how quickly the country’s new government can deliver on pledges to end a nearly three-year slump and transform the world’s second-most-populous nation into a manufacturing powerhouse.
Shilan Shah, an economist at London-based Capital Economics, said growth for the quarter “is still very lackluster by past standards—and in terms of what India can achieve at the moment.”
Starting in 2003, India’s economy grew 8% a year on average for nearly a decade, lifting millions out of poverty and creating a generation of young people with middle-class aspirations. The abrupt end of those halcyon years stirred voters’ perceptions that India’s previous government was inept and corrupt, helping to vault Prime Minister Narendra Modi into office this spring.
Figures from the Central Statistical Office indicated a significant deceleration from the preceding quarter, when gross domestic product expanded by 5.7 percent. One of the drags on growth in the September quarter was manufacturing output, which increased 0.1 percent, compared with 3.5 percent in the preceding quarter. Also, a delayed monsoon season and uneven rainfall caused agricultural output to slow to a 3.2 percent increase from a year earlier, from a 3.8 percent rise in the previous quarter.
India has experienced a period of economic malaise, with the pace of growth below 5 percent for the past two fiscal years, the lowest since the 1980s. India’s fiscal year begins in April.
Prime Minister Narendra Modi’s landslide election in May was based largely on his promise to kick-start the economy, in part by increasing the ease of doing business and providing jobs to the young. India’s business community regarded his victory with optimism, and the stock markets reflected the enthusiasm, rising to new highs.
The euphoria was tempered after it became apparent that Mr. Modi’s government was not going to rush to introduce big-bang reforms. In his first six months in office, Mr. Modi has announced some small measures aimed at improving business sentiment, like simplifying convoluted labor laws and deregulating fuel pieces.
These steps have yet to have an effect on the ground, and economists and executives are looking for more sweeping reforms to reinvigorate capital investment, increase business confidence and encourage industry. Indian businesses are awaiting new legislation dealing with land acquisition, coal and power supply, transportation, simplification of taxation and foreign direct investment in the insurance sector, some of which might be taken up in the current winter session of Parliament.
With weak economic growth in the last quarter and consumer inflation having slowed to 5.5 percent in October, Finance Minister Arun Jaitley is expected to ask the central bank governor, Raghuram Rajan, to ease monetary policy and cut the benchmark interest rate from 8 percent. But most economists believe that the central bank will leave the rate unchanged at a policy meeting on Tuesday and wait to see if inflation rates can stay low even if global oil prices start rising again. - Reuters
No comments:
Post a Comment