India's Economy Faces Sluggish Growth in January-March Quarter as Demand Weakens

India's economy witnessed its slowest growth in a year during the January-March quarter largely owing to weak demand
GDP Growth
GDP Growth

India's economy likely witnessed its slowest growth in a year during the January-March quarter owing to weak demand, a Reuters poll showed.

In the October-December period, the country's GDP saw an unexpected 8.4 per cent increase year-on-year. This majorly resulted from the reduction in subsidies which had artificially inflated net indirect taxes. 

Gross value added (GVA), on the other hand, which is a more accurate indicator of economic activity, stood at 6.5 per cent. 

India's economic growth is projected to have slowed to around 6.7 per cent in January-March quarter and GVA growth is expected to have slowed to 6.2 per cent. Moderation in both manufacturing and services sectors coupled with subdued contribution from agriculture resulted in this decline.

As per the poll, the economic growth, which is estimated to have averaged 7.7 per cent in the last fiscal year, is projected to decelerate to 6.8 per cent in the current fiscal year and further to 6.6 per cent in the upcoming year. This might indicate that the road to maintaining a consistent 8 per cent growth rate seems blurry for the world's fastest-growing major economy.

Many economists argued that to provide enough jobs for the increasing number of young workforce, a growth rate of 8 per cent or more is necessary. However, there are doubts as well if such high growth can be sustained over time.

Miguel Chanco, the chief economist for emerging Asia at Pantheon Macroeconomics, believes that India's economy could achieve a growth rate of 5-6 per cent, which he considers reasonable.

Meanwhile, there is a widening gap between the GDP forecasts made by financial experts and those put forward by the government in India. This gap has stirred up discussions and doubts about the 'accuracy' of India's methods for measuring economic growth.

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