New India govt suffers double economy hit

Prime Minister Narendra Modi’s new government suffered a double economic blow of slowing growth and rising unemployment as it took office Friday.

Modi named Nirmala Sitharaman as his new finance minister in a drastically revamped Hindu nationalist administration after winning a second straight landslide in the April-May election.

But hours after India’s first full-time woman finance minister took office, the government announced the third straight fall in quarterly growth to 5.8 percent in the first three months of the year.

The figure was down from 6.6 percent in the last quarter of 2018 and was much worse than the 6.3 percent that many analysts had predicted.

It means India has lost its place as the world’s fastest growing major economy to China, which had 6.4 percent growth in the first quarter. And some economists said slower investment growth and weak consumer spending mean India’s performance could be even worse in the next quarter.

In parallel, authorities also said the unemployment rate for 2017-2018 was 6.1 percent, which media said was the worst since 1973.

The jobless figures should have been released before the election. When a newspaper reported the gloomy unemployment report in January, Modi’s government said the statistics were not ready.

Modi’s Hindu nationalist Bharatiya Janata Party (BJP) won the election on a tough national security stance, barely mentioning the economy.

The bad news increases pressure on Sitharaman to kickstart reforms and create jobs for more than 12 million young Indians entering the workforce every year.

The BJP manifesto had promised a $1.4 trillion infrastructure spending spree over five years that it hopes will boost labour prospects.

“The slowdown shows Modi needs to address agricultural distress and focus on boosting economic activity and generating employment,” Ashutosh Datar, a Mumbai-based economist told AFP.

“Sitharaman and Modi will have to decide on finding long-term solutions to economic problems instead of short-term fixes,” Datar added.

Modi was much-criticised for suddenly cancelling a huge proportion of bank notes in 2016, in a bid to hit the black economy.

The economy has still grown by about seven percent a year since he first took office in 2014 on a pro-business platform but that has not been enough to create desperately needed jobs.

Huge debts in the agriculture sector -- still India’s biggest employer -- have also hit the economy and been blamed for the suicides of thousands of farmers.