India’s economy has hit a soft patch just as national elections loom.
The country’s annual rate of growth slumped to 6.6% in the quarter ended December. That’s a sharp drop from 7.1% recorded the previous quarter and the weakest performance in more than a year. Economists surveyed by Reuters were predicting GDP growth of 6.9%.
The plunge is a troubling sign for Prime Minister Narendra Modi as he bids for a second term in office.
India’s elections are due to be held before May, and Modi’s stewardship of the economy has come under increased scrutiny ahead of the vote.
The Indian leader came to power in 2014 promising to create millions of jobs and boost the economy. But growth is down from its recent peak of 8.2% in the middle of 2018, and a recent study showed that unemployment has risen across the country.
India is still the world’s fastest growing major economy after China’s growth slowed to 6.4% in the last quarter of 2018. But analysts say the comparison won’t matter to voters who feel they’re not reaping the benefits of India’s relatively strong growth.
“Are people living that feel-good factor? The sense is that they are not,” said Pronab Sen, country director for India at the International Growth Centre.
“What you’re seeing is a serious urban employment problem… especially among the youth. And these are your first time voters,” he added.
Besides the lack of jobs, Sen highlighted plunging incomes in farming — a key sector of the economy and a large part of the electorate — as another factor that could hurt Modi at the polls.
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India’s economy has suffered collateral damage from global pressures like the US-China trade war and a spike in oil prices, said Anubhuti Sahay, India economist at Standard Chartered.
The country’s central bank, the Reserve Bank of India, tried to shore up growth by slashing interest rates for the first time in six months in February. Sahay anticipates the slowdown will result in them being brought down further at the bank’s next meeting in April.
“From the policymakers’ perspective, it clearly paves the way for another rate cut,” she said.