Indian economic growth expected to have slowed slightly in three months to July

india gdp estimate
Photo: Sanjay Kanojia/AFP/Getty

The first estimate of Indian economic growth for the three months to July will be released today, likely confirming forecasts that economic output slowed to 5.7%.

Due to slowing auto sales, output of consumer products and cement and steel production, this will be the Indian economy’s slowest rate of expansion in more than five years.

Last week, Finance Minister Nirmala Sitharaman announced reforms to revive economic growth, including rolling back recent tax hikes on foreign and domestic equity investors. However, economists argue that they focus too much on steps to spur foreign funds and lending and ignore any major fiscal support for businesses.

The lack of a fiscal response now puts the burden on the Reserve Bank of India to continue with its stimulus. Governor Shaktikanta Das has already cut interest rates to the lowest in nine years, but last month’s central bank meeting indicated further rate cuts in the next few months. Those reductions could provide some cushion, but without necessary fiscal measures, the slowing economy is unlikely to restart. Such measures could come in the form of a reduction in the goods-and-services tax on vehicles to halt the worst slump in car sales in almost two decades.

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