Why in India, 6% Economic Growth Is Cause for Alarm

For almost half a decade Indian Prime Minister Narendra Modi headed the fastest-growing major economy in the world. Now, what looks set to be the slowest expansion in over a decade is putting India behind China, Indonesia and a few others in the region. Waning consumption at home, troubled banks and a gloomy global outlook are being blamed, prompting a flurry of government measures. Surging food prices are adding to the malaise. At risk are efforts to reduce poverty in Asia’s third-largest economy and the ability to generate jobs for the more than 10 million young people entering the workforce each year.

The Statistics office estimates growth slowed to 5% this fiscal year, which ends March 31. That is a far cry from the 8.2% expansion seen in 2017 and the slowest since 2009, when the global financial crisis hit. The government sees manufacturing output growing at just 2%, compared with 6.9% last year, while expansion of the dominant services sector is down to 6.4% from 7.7%. The slowdown across sectors highlights a slump in consumption, which makes up about 60% of GDP. That can be attributed in part to a crisis among shadow lenders and a build-up of bad loans at banks, which in turn curbed lending in the economy. Waning consumer confidence and unemployment at a more than four-decade high have also hurt.