India’s economic growth drifts behind China’s as PM Modi begins second term

Experts believe India is out to cede its spot as the fastest growing large economy to China, according to the January- March quarter. The domestic and world consumer demand has greatly affected the manufacturing industry as well as the service providers.

Despite the go-slow in the economy, Prime Minister Narendra Modi has been offered another term to improve on his five-year record. Once in office, Modi’s biggest responsibility is to ensure the economy expands after it depreciated during his first term.

Economists in a survey by Reuters had their annual forecasts for growth at 6.3 percent between January and March, the lowest it has been in six quarters.

China posted 6.4 percent growth in the quarter ending in March, the very first positive growth in one and a half years. With these growth statistics, China takes the lead outdoing India.

On Friday, the gross domestic product data for the quarter ending in March as well as provisional forecasts for the financial year 2018-2019 which ends in March is expected to be released this week.

The RBI has slashed its economic growth estimate for the 2019- 2020 financial year which begins in April to 7.2 percent.

This year, the monetary policy committee of Central Bank slashed policy rates by 50 basis points. In its two-day meeting scheduled in June, might lower the repo rate by 25 basis points to 5.75 percent. This will be the lowest decrease since July 2010.

The past six months have not been good with retail inflation below 3 percent. The situation might cause rates reduction even before the monsoon rainy season comes, potentially affecting prices of food.

The are some red flags of the declining domestic consumption such as rail freight, automobile sales, domestic air traffic, petroleum product consumption among others.

Moody’s reported on Tuesday that corporate earnings had declined in the January to March quarter, down 10.7 percent.

Most industry chambers want financial boosts like slashed corporate tax rates and possibly lowered interest rates.