India's GDP growth falls to 5.5%
India's GDP growth languished around its lowest in three years in the quarter that ended in June, offering no respite for Prime Minister Manmohan Singh as he struggles to escape a series of political scandals that have paralysed his economic agenda.
Weak demand in the West has hit exports, but the heaviest toll on the economy is from overspending and a lack of reforms at home - a point made by both the central bank and ratings agencies Fitch and Standard & Poor's, who threaten to downgrade India's sovereign ratings to junk.
The economy grew 5.5 percent in the quarter, government data showed on Friday, just above the 5.3 percent posted in the three-month period ending in March and slightly better than economists' expectations in a Reuters poll.
Some investors have been optimistic a weak growth number would persuade the central bank to lower interest rates at its Sept. 17 policy meeting, but the bank's recent comments remain hawkish in the face of stubbornly high inflation.
The RBI still maintains a hawkish bias and rate cuts are still seem some way off. Asian data momentum has not been great in Q3 so it is difficult to see a dramatic improvement in Q3, said Jonathan Cavenagh, a currency strategist at Westpac, Singapore.
The absence of a stronger rebound in growth is further bad news for the government, which is embroiled in a row with the main opposition Bharatiya Janata Party (BJP) over sweetheart coal deals. The state auditor has questioned the deals, and the BJP
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