INSUBCONTINENT EXCLUSIVE:
fastest growing major economy to China in the January-March quarter as a chill in domestic and global consumer demand hit manufacturers and
service providers.The slowing economy didn't stop voters giving Prime Minister Narendra Modi a landslide victory in an election concluded
earlier this month.But it puts an onus on him to deliver reforms that can truly unlock growth, which had waxed and waned during his first
five years in office.A survey of economists by news agency Reuters forecast growth slipped to 6.3 per cent annually in the three months
ending in March, its slowest pace in six quarters.If they are right, India would lag China, which notched 6.4 per cent growth in the March
quarter, for the first time in one-and-a-half years.PM Modi will be sworn in later on Thursday, and is expected to begin his second term by
prioritising growth in an economy that isn't creating enough new jobs for the millions of young Indians entering the labour market each
month.His first task could be finding a new finance minister, as Arun Jaitley has asked to step aside due to health reasons
Whoever takes Mr Jaitley's place will have to draw up a budget due to be presented in July.The government is widely expected to deliver
some fiscal stimulus while keeping the deficit at manageable levels
On the plus side, the Reserve Bank of India could have leeway to reduce interest rates as inflation remains subdued.The gross domestic
product data for January-March quarter and provisional estimates for the whole 2018-19 fiscal year ending in March will be released on
Friday around 5:30 pm.The RBI has lowered its economic growth forecast for 2019/20 fiscal year beginning April to 7.2 per cent.The central
bank's monetary policy committee (MPC), which has cut policy rates by 50 basis points this year, is expected to cut the repo rate by a
further 25 basis points at its June 4-6 meeting, bringing it to 5.75 per cent, the lowest since July 2010.Retail inflation has stayed below
3 per cent for last six months, possibly low enough to take the risk of cutting rates without waiting to seeing whether the monsoon rainy
season starting next month holds any danger of a spike in food prices.Several indicators - automobile sales, rail freight, petroleum product
consumption, domestic air traffic and imports indicate a slowdown in domestic consumption.Corporate earnings hit a six-quarter low growth of
10.7 per cent during January-March quarter on weakening consumer sentiment and softening commodity prices, ICRA, the Indian arm of the
ratings agency Moody's , said on Tuesday, citing a sample of over 300 companies."The signs of slowdown in domestic demand are visible both
in urban and rural areas," Federation of Indian Chambers of Commerce and Industry said in a statement earlier this week, while submitting
pre-budget demands to the finance ministry.Industry chambers have lobbied for a fiscal stimulus including a cut in corporate tax rates and
lower interest rates.The government could front-load its budget spending and announce some tax sops for individual tax payers and companies,
a senior finance ministry official told Reuters, while citing fiscal constraints due to a slower growth in tax receipts.But some economists
said monetary and fiscal stimulus could have a limited impact.They fear the economy is in danger of a prolonged phase of slower growth due
to stagnant rural wages, rising real interest costs for manufacturers and reluctance to lend among banks and non-bank finance firms due to
alarmingly high defaults."While cyclical challenges can be addressed through short-term measures, the need of the hour is to address the
structural challenges plaguing the Indian economy," said Sunil Kumar Sinha, economist at India Ratings and Research, the arm of Fitch
ratings agency.Some finance ministry officials have suggested PM Modi's government could push long pending reforms, related to land
acquisition and labour, during the coming year, though it will have to coordinate with state governments.
