India's economic growth rate slows to 5.3%

A worker in an Indian factory A decline in manufacturing activity has added to fears about the health on the Indian economy

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India's growth rate slowed in the July to September quarter, putting pressure on the government to implement more reforms and ease monetary policy.

The economy grew by 5.3% from a year earlier. That was down from a rate of 5.5% in the previous three months.

India has taken various steps, including opening its retail and aviation sectors to foreign investment, in an attempt to boost its growth rate.

However, analysts said more measures were needed to spur the economy.

The latest growth figure matched that seen in the first quarter of the year, which had been the lowest rate for three years.

Brinda Jagirdar, chief economist at State Bank of India, said that India's central bank needed to cut interest rates to help revive growth.

The central bank, the Reserve Bank of India (RBI), has so far resisted the calls to lower borrowing costs, saying its focus is to keep inflation under control.

However, Ms Jagirdar said that "there is a wide-scale slowdown in growth and focus now should shift from inflation to growth".

"Growth has become critical as consumption is stalling on top of continued investment slowdown," she added.

Bottoming out?

Start Quote

Some policy action is happening in India that will boost overall business sentiment and improve the investment climate”

End Quote Sujan Hajra Anand Rathi Securities

Several factors have contributed to India's economic growth slowing over the past few months.

Weaker global demand for exports, a dip in foreign investment and a political stalemate over key reforms have been cited as key reasons behind the drop in the growth rate.

Prompted by fears that growth may slow further, the government has announced reforms to attract foreign investment in key sectors over the past few weeks.

At the same time, the RBI has - twice in two months - lowered the amount of money that banks need to keep in reserve to try to boost lending.

The moves are expected to inject 275bn rupees ($5bn; £3.1bn) into the markets.

Analysts said these measures, coupled with signs of improvement in major economies such as the US, were likely to have a positive impact on growth in the coming months.

"The global environment is improving, some policy action is happening in India that will boost overall business sentiment and improve the investment climate," said Sujan Hajra, chief economist at Anand Rathi Securities in Mumbai.

"Agricultural outlook is [also] likely to be better than previously expected, which will aid growth.

"The second half of the fiscal year will be slightly better than the first half, and we expect growth to be around 6% during the period," he added.

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