India’s economy shows further growth pains

India’s economy shows further growth pains

WO-AR199A_IGDP_NS_20140131180308India’s last fiscal year (ending March 2013) has grown only 4.5 %, before it was earmarked at 5.0 %. On the other hand the year before was amended from 6.2 % to 6.7 % growth, and was mostly due to the industrial growth

It is customary in India to revise the annual growth number three times over a period of three years as it slowly is provided with more detailed data from across the economy. The announcement for the last fiscal period was not accompanied by any comment, but it is the country’s weakest growth rate in a decade.

The revised growth may further erode the support of the Congress party-led coalition government. Most polls predict it will lose to the opposition Bharatiya Janata Party in the national elections up before the end of May 2014.

Experts claim that India’s economy is growing well below potential and there is little clarity when i8t will revert to its potential growth rate.

Economists said companies aren’t able to expand operations due to delays in regulatory clearances and lack of infrastructure facilities.  High interest rates driven by the central bank’s aggressive efforts to tame inflation have been pushing up borrowing costs, crimping growth.  Last Tuesday, the Reserve Bank of India unexpectedly raised its key interest rate for the third time in five months.

www.wsj.com


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