India's economic growth rate slowest for two years

An Indian employee checks tyres for faults at the JK Tyre and Industries manufacturing plant in Mysore Image copyright Getty Images

India's economy grew at its slowest pace for two years in the April to June quarter, according to official figures.

The growth rate slowed to an annual rate of 7.1%, compared with 7.9% in the previous quarter.

It is the slowest growth since the April to June quarter in 2014, when the rate was 6.7%.

Analyst Abhishek Upadhyay of ICICI Securities said growth "continues to be driven by government spending while private spending remains muted".

The sharp slowdown in growth could make it more difficult for the government's to reach its target of 8% in the year, although the country retained its claim to be the fastest-growing large economy, ahead of China.

Growth was dragged down in the quarter by a contraction in mining and a sluggish agricultural sector.

Reform push

"This number is much, much below the market expectation," said Devendra Kumar Pant, chief economist at India Ratings and Research.

Growth needs to be towards double digits to create the jobs that Prime Minister Narendra Modi has promised to the millions of Indians joining the workforce each year.

Mr Modi has sought to get growth moving by implementing reforms and boosting government spending to offset a lack of private sector investment.

In the summer quarter, the monsoon season should provide some support to growth.

Normal rainfall this summer after two seasons of drought could lift rural consumption by $80bn in the year to the end of March 2017, according to Citibank estimates.

A wage rise for nearly 10 million federal government employees and pensioners could also help fuel spending.

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