India's economic growth slowest since 2009

August 30, 2013: 11:29 AM ET
india gdp
India's GDP growth hit is lowest level since the beginning of 2009.
LONDON (CNNMoney)

India's economy just can't seem to catch a break.

The nation's gross domestic product -- the broadest measure of economic growth -- came in at 4.4% annual rate for the April to June quarter.

That's India's lowest quarterly growth since the beginning of 2009, heightening concerns about a nation that is struggling with a falling currency, dysfunctional politics and a highly volatile stock market.

"This number is a little bit lower than consensus expectations, but expectations were quite low to begin with," said Anjalika Bardalai, a senior analyst at Eurasia Group in London.

Growth in the January to March quarter was also sluggish, at 4.8%. The most recent International Monetary Fund report forecasts that India's economy will expand by 5.6% in fiscal 2013, but many economists believe that number is overly optimistic.

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The GDP data was released just hours after the country's prime minister, Manmohan Singh, said "the fundamentals of the Indian economy continue to be strong," while acknowledging that India faced "a difficult economic situation."

The Indian rupee has lost roughly 12% of its value during the past month, with much of it coming in a series of stomach-churning drops during the past few days. The sharp currency devaluation is extremely problematic since the country imports many more goods than it exports. That could leave consumers struggling to pay higher prices for everyday goods.

Equity markets have also taken a big hit in recent days. The benchmark Mumbai Sensex index has quickly turned into one of the worst performers in Asia.

The government has responded with a series of policy changes, but none have been particularly effective in stabilizing the recent volatility.

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Economists have long argued that India needs to implement structural economic reforms to bring about meaningful progress. Last year, parliament lifted restrictions on foreign direct investment after much debate -- a key step.

But Eurasia's Bardalai said India is simply not making enough progress with its economic reforms, and that's hurting the country's future prospects.

Meanwhile, time for making bold new reforms is running out, with national elections due to take place by May 2014.

--CNNMoney's Charles Riley contributed to this report.

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