India’s economic growth slowed in the last quarter of 2015.
Gross domestic product grew an annual 7.3 per cent in the October-December quarter, less than an upwardly revised 7.7 per cent in July-September.
That rate of growth was faster than the 6.8 per cent posted by China in the same quarter. They point to weak exports, railway freight, cement production, investment and flat order books as evidence of weakness.
New Delhi also forecast that GDP growth for fiscal year 2015-16 would accelerate to 7.6 per cent from a revised 7.2 per cent a year earlier. For that forecast to materialise, however, the economy would have to grow at a rate of 7.8 per cent in the three months through March.
Worryingly for Finance Minister Arun Jaitley, who unveils his budget at the end of February, nominal growth – which drives tax revenues – is weakening because of the global commodities slump. That will make it harder to contain the government’s borrowing needs.
India’s GDP data has been under scrutiny since last January when statisticians unveiled new methodology they say better captures value addition in the goods and services supply chain.
The new readings transformed the lumbering South Asian giant overnight into one of the fastest growing major economies.
This week’s data did little to put those doubts to rest and if anything, raised further questions about its accuracy.
Economic growth for the April-June quarter, for example, was surprisingly marked up to 7.6 per cent from a provisional seven per cent reported earlier.
Annual manufacturing growth of 12.6 per cent in the December quarter contrasted greatly with other indicators – such as corporate order books, inventory ratios and factory capacity utilisation – that all pointed to weakening momentum.
“The data looks difficult to correlate,” said Shubhada Rao, chief economist at Yes bank in Mumbai.
India’s chief statistician T.C.A. Anant defended the figures, saying sales may be slow but profits are rising.
Asia’s third-largest economy is widely viewed as a beacon of stability in an uncertain global economy, with weaker commodity prices helping to cool India’s inflation and improve its fiscal and external balances.
But Modi’s struggle to win bipartisan support in parliament for long-pending land, labour, bank and tax reforms has begun to take a toll on investor confidence.
That puts the focus on Jaitley’s third annual budget on February 29, which is expected to include measures to address rural distress and boost investment.
But worryingly for Jaitley, nominal GDP is forecast to grow 8.6 per cent in fiscal year 2015-16 compared with 10.8 per cent a year before. The slowdown is likely to add fuel to an ongoing debate within the government over whether to hike borrowing and spending to stimulate sluggish demand.