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Cautious Spending To Weaken India’s Economy

May 16, 2019

Cautious Spending To Weaken India’s Economy

India’s consumers who once drove the fastest-growing major economy, now threaten to weaken it. More cautious spending on everything from shampoos to cars and travel is slowing eating away at the backbone of India’s economy, contributing about three-fifths of gross domestic product. This hesitant pullback has acted as a drag on the growth of the economy, which is predicted to have slowed for a fourth consecutive quarter to 6.5% in the last three months to March. This has been the weakest pace since mid-2017, now making us almost on par with China.

While official GDP numbers for the March quarter will be out on May 31st, high-frequency data for services and manufacturing point to slowing down of industrial production for the first time in nearly two years. This economic sluggishness may persist for a year, according to Credit Suisse Group AG, given high-interest rates and stress among India’s state-run and shadow banks. If this slowdown continues, it would pose a significant challenge to the next government, which is likely to be in place by late May.

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