Three years ago, India was enjoying economic growth of about 9%. Now the rate of expansion has slumped to just half that.
The country’s gross domestic product grew by just 4.5% in the July to September quarter, the lowest level since early 2013. GDP growth was at 7% in the same period last year, and 5% in the previous quarter.
Economic growth has now fallen for six consecutive quarters, a slide that can be partially attributed to the recent weakness of India’s factories. The manufacturing sector shrank 1% last quarter, compared to 6.9% growth during the same period a year ago. The growth rate for agriculture was more than cut in half.
The GDP figure is the weakest recorded under Prime Minister Narendra Modi, who first swept to power five years ago promising to take India’s economy to new heights and create millions of jobs every year.
But troubles have set in for Asia’s third largest economy during the past year. The country’s automotive sector has shed hundreds of thousands of jobs, and consumer goods companies like Unilever (UL) reportedly started slashing prices because of slowing demand.
Since winning re-election by a landslide in May, Modi and his government have scrambled to boost the economy. They’ve relaxed regulations, unveiled tax breaks for startups and offered cheaper home and car loans, among other measures.
The Reserve Bank of India has also been cutting interest rates, and it’s likely to act again imminently.
“With a strong rebound in the near term looking unlikely, there is a rising chance that the rate cut that is almost certain next week will be followed by another in February,” Capital Economics said in a research note.
— Rishi Iyengar contributed reporting.