(Image Source: Karvy Private Wealth )

BY XIAONAN WANG

ANCHOR LAUREN GORES



The Indian economy is slowing down.

The government reported Wednesday India’s GDP increase in the last quarter hit a new low. The Hindu Business Line has the details:

“The Indian economy grew at the slowest annual pace in almost three years in the October-December quarter at 6.1 percent ... compared poorly with the 8.3 per cent growth recorded in same quarter the previous year, and was also lower than the 6.9 per cent of Q2.”

The figure may not sound very low, but an Indian business official says this is like their worst fears coming true. An Analyst told BBC why a 6.1% increase raises concerns:

“India needs at least 8% of growth to keep introducing new jobs, creating more jobs, because over half the country is under the age of 25.”

Analysts said the slowdown is more pronounced and broader-based than previously thought. Economists expected a slightly higher number — 6.3 percent according to a Bloomberg survey. LiveMint quotes an economist for Moody’s explaining what caused the slowdown.

“The economy has slowed in the face of weaker external demand, rising global uncertainty, elevated interest rates, high inflation, a stagnant government and declining business confidence”

An analyst tells Bloomberg Indian’s economy may be dipping lower in the short term. But she didn’t think cutting rates is an option for the government.

“More worrisome is, of course, the control on inflation for the future to come. … But I would actually expect the Reserve Bank of Indian to stay on hold in as far as bond rates are well-balanced.”

Although there has been widespread disappointment over Indian’s recent economic performance, some economists says the latest report shows some silver lining. Here is the analysis from Financial Times .


“There are signs of some improvement... If this trend continues, with more positive data releases, then probably 6.1 per cent is the worst for Indian economic activity and from here onwards we should see a margining improvement.”

The government says weak manufacturing and mining output are dragging down growth. India’s Prime Minister Manmohan Singh said earlier this month that once the global economy stabilizes, India will return to 8.5 percent to 9 percent growth.