India Growth Unexpectedly Loses Steam

India’s economic expansion unexpectedly slowed in the three months to March and thus, the country lost its claim of having the fastest growing economy in the world.

Gross domestic product grew 6.1 percent year-on-year after 7 percent expansion in the previous three months, preliminary data from the Central Statistics Office showed Wednesday.

In contrast, economists had expected an improvement in the growth rate to 7.1 percent.

During the first three months of the year, China’s economy grew 6.9 percent.

The CSO also estimated that the economy grew 7.1 percent in the fiscal year ended March 31, in line with earlier official estimates.

Growth for the year 2015-16 was revised to 8 percent from 7.9 percent.

Latest data puts a damper on the euphoria surrounding the completion of three years in power of the pro-business Narendra Modi government.

The period saw some drastic economic measures such as the currency demonetization in a push against the illicit money and the start of the implementation of the Goods and Services Tax.

“The pace of growth recorded by the national accounts data seems reasonable,” Capital Economics economist Shilan Shah said.

Shah pointed out that the slowdown in growth does not tally with other evidence which has tended to suggest that growth stabilized or picked up in the March quarter.

“It is presumably linked to the disruption caused by demonetization though and, in that light, the key point is that more recent data suggest that activity has since continued to recover,” Shah said.

Manufacturing growth slowed to 5.3 percent from 8.2 percent in the March quarter, while farm growth eased to 5.2 percent from 6.9 percent.

Construction was the only sector to register contraction, shrinking 3.7 percent after 3.4 percent growth in the previous three months.

Growth in financial, real estate and professional services slowed to 2.2 percent from 3.3 percent. The sector that includes trade, hotels, transport and communication saw growth falling to 6.5 percent…

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