Slower India Growth Adds Pressure On Government, Central Bank

(RTTNews) - The Indian economy maintained its robust growth in the three months to June, though the pace of expansion eased more-than-expected, adding pressure on the government to press ahead with reforms, and strengthened calls for policy easing.

Gross domestic product rose 7 percent year-on-year, preliminary figures from the Central Statistics Office showed Monday. Economists had expected the growth rate to ease to 7.4 percent from 7.5 percent registered in the first three months of the year.

Gross value added grew 7.1 percent year-on-year in the second quarter.

Even though the growth momentum slowed, India matched China's 7 percent expansion for the June quarter. In the first quarter, the former managed to outpace the latter's pace of growth.

"The GDP data remain inconsistent with numerous other indicators which suggest that, at best, the economy is in the early stages of recovery after three years of tepid growth," Capital Economics economist Shilan Shah said.

"On the basis of these alternative measures, there is still a case to be made for further, albeit limited, policy loosening," the economist added.

The Reserve Bank of India has lowered the key interest rate by 75 basis points this year. Economists are looking for another quarter-point reduction in the next review due September.

Early August, the central bank left the repo rate unchanged at 7.25 percent as it awaited greater transmission of the effects of the previous three rate reductions into the economy. The bank retained its economic growth forecast for 2015-16 at 7.6 percent.