MUMBAI, India—India’s economic growth skidded to 6.9 per cent for the July-September quarter—its lowest in over two years.
High inflation has weakened demand and prompted the central bank to hike rates 13 times over the last 18 months, crimping growth as a dour global economy squeezes credit and exports.
Policy lethargy and corruption have also slowed the flow of crucial investments and pushed the rupee to record lows.
The results were in line with expectations and put pressure on the central bank to arrest—and perhaps reverse—its streak of rate hikes.
Gross fixed capital formation—a measure of investment—slid 1.8 per cent from the prior quarter to $77.3 billion.
Economists and business leaders say broad reform is necessary to rekindle investment and growth—no easy task in India’s cacophonous coalition democracy. The commotion over the government’s long-anticipated decision to grant foreign retailers greater access showcases the difficulty of implementing meaningful policy changes.
Fights over land acquisition and flip-flopping environmental approvals have stalled some big-ticket projects and dampened investor sentiment.
Europe’s sovereign debt crisis has also prompted European banks—which provide some $150 billion of foreign currency loans to Indian companies, — to pull back, making expansion more difficult.