NEW DELHI: India's GDP growth slowed to 6.1% in the first quarter, despite positive forecasts that suggested the country would remain the world's fastest growing major economy, new government data shows.
As reported by Reuters, annual domestic growth in the period January to March 2017 was down 0.9 percentage points, compared with 7% growth last quarter, which defied the expectations of economists in a Reuters poll on Monday that forecast 7.1% growth this quarter.
In a broader context, the figures show that the Indian economy is lagging behind China's growth of 6.9% over the same period. Year on year, this represents a significant slump, as India grew 7.9% in the first three months of last year.
The disappointing figures have been interpreted as confirmation that Prime Minister Narendra Modi's dramatic abolition of much of the country's cash in November has put serious strain on the economy, according to the Financial Times.
For Modi, who last week marked three years in office, the slump reflects the challenge of his election promise to invigorate the country's sluggish economy.
Tirthankar Patnaik, a strategist at Mizuho Bank, told Reuters that the disappointing data "clearly reflects some amount of extreme impact from demonetisation".
The biggest challenge, however, "is the lack of, or absence, of private investment," said Upasna Bhardwaj, senior economist at Kotak Mahindra bank.
Other economists pointed out that the weakening performance was consistent with high frequency data, such as steel production and cement sales, which suggested a larger slowdown.
However, research from the Kotak Mutual Trust in April suggested that the GST (Goods and Services Tax) will be beneficial to many companies – and the advertising industry in particular.
In some quarters, the tax change, which will subsume all central and state taxes following implementation on 1st July, is expected to contribute around 2% to the country's GDP.
Data sourced from Reuters, Financial Times, Times of India; additional content by WARC staff