India Economic Slowdown: Country loses place as world's fastest growing economy

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02:31

Indian Prime Minister Narendra Modi is facing a big challenge to get the economy back on track. New numbers show the GDP grew by 5.8 percent in the first quarter - bringing overall growth to a five-year low. CGTN's Ravinder Bawa spoke to economists to find out what's happening.

Prime Minister Narendra Modi and his team are welcomed to their second terms with bad news of a slowing economy. The new numbers released show that the Indian economy has grown at its slowest pace in the last five years at 6.8 percent.

JAYATI GHOSH DEVELOPMENT ECONOMIST "Investment has been declining that's not a sign of a booming economy. Investment has many bad implications it is bad for future growth of course. If anyone looked at GDP, they should have asked how is GDP booming, but it also suggests that there is insufficient demand in the economy."

One of the major reason for declining demand is unemployment. The figures released by the government show that joblessness at 6.1 percent, which is the highest in last four decades.

SUNI SINHA PRINCIPAL ECONOMIST, INDIA RATINGS "The key driver of slowdown is private consumption an expenditure which is visible in rural areas due to rural distress and even in the urban areas as the income growth is not happening as it was earlier, so all of this is resulting in people spending less."

Economists say that the government needs to kick-start demand generation immediately through employment generation. That's where industry comes in who want the government to re-energise the engines of growth and pump the economy.

DILIP CHENOY, SECRETARY GENERAL FEDERATION OF INDIAN CHAMBERS OF COMMERCE & INDUSTRY "We need money to invest and the money to invest is not there because of the high interest rate and lack of capital. The finance ministry will have to recapitalise some of the public sector banks. Merge and amalgamate some banks to ensure that onward lending takes place."

As the industry demands, the government has set a 100-day agenda rolling. In the next few weeks, India will see some new economic reforms. Privatisation of state assets and changes in labour and land rules are in the offing to support businesses. Ravinder Bawa, CGTN, Delhi.