The Indian economy grew at less than 8% between April and June, its slowest rate in 15 quarters. While a lot has been said and written about the recent slowdown in manufacturing, the latest quarterly numbers show that the slowdown has spread to the services sector.
Financing, insurance, real estate and business services are almost as large a portion of the Indian economy as manufacturing is. These services saw single-digit growth in the first quarter of the current financial year. And, expectedly, manufacturing grew at a mere 5.6%. Most other sectors are slowing, though construction activity is still growing in double digits.
Is the slowdown severe enough for the Reserve Bank of India to cut interest rates? We doubt it—even though growth over the next few quarters may be even lower. The inflation number to be read from the new data—the so called gross domestic product deflator—is 8.4%. That’s more proof that inflation in India is still too high for comfort.