New Delhi: India is forecast to post an eighth straight quarter of below five per cent growth later Friday, underscoring challenges facing new Prime Minister Narendra Modi to revive Asia’s third-largest economy.
Growth has crumbled from nearly double-digit rates just three years ago, a level economists say India must reach again to generate jobs for its vast young population. The latest data ‘will be a reminder’ for the new right-wing government “that a lot of work needs to be done in the economy before growth can pick up again,” said Nomura Asia interest strategist Vivek Rajpal. The economy expanded 4.8 percent on year in the fourth quarter of the financial year to March 31, according to consensus growth forecasts. Meanwhile, tightening over the past year of both monetary and fiscal policy to curb inflation has fuelled downward pressure on growth.
The previous left-leaning Congress government forecast the economy would grow 4.9 per cent in the past fiscal year to March, after expanding by a decade low of 4.5 per cent in the previous 12 months. Modi, sworn in Monday as India’s premier and known for his fast decision-making during more than a dozen years as chief minister of prosperous western Gujarat state, has spelt out 10 priority areas to revitalise the economy.
These include swift implementation of a national goods and services tax to speed up business transactions, lifting a ban on mining in dense forest areas and moves to raise the foreign investment cap to revitalise India’s ageing military equipment. Modi’s Hindu nationalist Bharatiya Janata Party (BJP) trumpeted ‘the start of a new era’ after winning the first majority in three decades with voters booting out the Congress party – angry over tepid growth, stubborn inflation and rampant corruption.
Business leaders want him to dismantle the array of bureaucratic controls that have stalled multibillion-dollar investment projects, overhaul creaking infrastructure that impedes productivity, simplify tax levies and ease cumbersome land acquisition rules. Power is dispersed in India and many reforms, such as a simplified national tax, require state approval under the nation’s federal system so some progress may be slow, economists say. The BJP and its allies control only eight of the state governments.
But Modi’s landslide victory has freed him from the fractious coalition politics that paralysed decision making under Congress.