Indian economic growth slips to 6.1%

File photo of Indian Prime Minister Manmohan Singh, whose nation is facing slower growth.

Story highlights

  • India's weakening economy grew 6.1 per cent in the quarter to the end of December
  • Slowest in three years, deepening fears about the country's growth prospects

India's weakening economy grew 6.1 per cent in the quarter to the end of December, the slowest in three years, deepening fears about the country's growth prospects.

A slowdown in manufacturing, mining and agriculture has accelerated the shift of Asia's third-largest economy to lower growth after a failed push to hit double-digits.

Rajiv Kumar, the director-general of the Federation of Indian Chambers of Commerce and Industry, said that an official target of 6.9 per cent growth for the full year was out of reach and a bounce back next year unlikely.

He warned that the strong performance of the services sector in the three months to December was unlikely to be sustained in the fourth quarter, January to March, and could be pulled back by poor performance of other sectors.

"It's a sobering number, below consensus. The numbers are telling us that we will be lucky to get 6.9 per cent growth overall for this year," Mr Kumar said.

He said India was on course for 6.8 per cent growth in fiscal year 2013. The government, by contrast, has predicted a bounce back to 8.5 per cent next year.

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Money flowing back into the markets

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India bracing for slow growth

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Data released on Wednesday showed economic growth for the quarter to the end of December slowed to an annualised 6.1 per cent, weighed on by two years of progressive monetary tightening, a retreat of foreign capital and a weakening local currency.

"Policymakers are battling inflation, falling confidence, a stalled government and tepid global demand. They'll be lucky to have growth hit 6.5 per cent in 2012," said Glenn Levine, senior economist at Moody's Analytics.

Sonal Varma, economist at banking group Nomura in Mumbai, said the slowdown in Asia's third-largest economy was "clearly evident".

"What is surprising is the slowdown in investment and manufacturing is worse than during the 2008 global financial crisis. It's the worst for these sectors for a decade."

Economists have taken heart from recent efforts by senior policymakers to energise the economy and make progress with economic reforms.

They are now putting considerable store in a central bank monetary policy review meeting on March 15 and the national budget on the following day to take action to arrest the slide in growth.

"India needs concerted policy measures at all levels to support trends at 7 per cent [growth]," said Rohini Malkani, economist at Citigroup in Mumbai.

Samiran Chakraborty, economist at Standard Chartered Bank in Mumbai, said the Congress-led government had to take steps to revive domestic investment.

"Unless action happens from the government to stimulate growth the outlook looks quite ominous," he said.

Criticism has grown in past months about Mr Singh's economic management. Many senior business figures blame the country's political leadership for throwing away a golden opportunity to put India's domestically-driven economy on better terms with neighbouring China and trading partners in the west.

Top executives, like Sunil Bharti Mittal, the chairman of telecoms group Bharti Airtel, and Ratan Tata, chairman of the Tata Group, have appealed to feuding political leaders to revive a parliament now notorious for stalling legislative progress

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