India’s economic growth has remained subdued, due largely to a slowdown in the manufacturing sector, official figures have shown.
The economy grew at an annual rate of 4.6% between January and March, below analysts’ forecasts and the same pace as the previous quarter.
For the full 2013-14 financial year, growth was 4.7%, the second straight year of sub-5% expansion.
New Prime Minister Narendra Modi has pledged to boost growth.’Turnaround’ coming
The manufacturing sector contracted at an annualised rate of 1.4% over the quarter, while the mining sector shrank by 0.4%. Offsetting this was a 6.3% growth in the agricultural sector.
“The quarter’s weak growth was mostly due to weakness in investment, held back by last year’s spike in interest rates, slow credit growth, and sentiment made more pessimistic by the rupee’s volatility,” said Bill Adams at PNC Financial Services Group.
Asia’s third-largest economy has been weighed down in recent years by high inflation, a weak currency and a fall in foreign investment.
Two years ago, India’s growth rate stood at about 8%. This level of growth is needed to provide enough jobs for India’s growing population – economists estimate 10 million jobs need to be created each year.
The last government failed to meet that target – data shows that between 2004-05 and 2011-12, just 53 million jobs were created.
However, many economists are upbeat and expect growth to increase, and more jobs to be created, on the back of Mr Modi’s election.
“As soon as investors see the first signals of growth-supportive policies, you will see a definite turnaround on the ground,” said Adi Godrej, chairman of the Godrej group.
Spending on infrastructure is expected to increase significantly in the coming months, a stimulus that should help boost growth towards in the end of the year, analysts say.