India’s prime minister’s house has gone under, and the country’s economy is in the process of recovering.
In a country of 2.5 billion, India’s economy contracted 0.8 percent in the third quarter.
While that’s down from the previous quarter’s 0.9 percent contraction, it’s still the fastest growth in nearly a decade.
India’s gross domestic product is expected to grow 3 percent this year, up from 3.7 percent in 2018, the government’s chief economic adviser said in a speech to Parliament on Monday.
“The slowdown in growth was caused by the slowdown in private investment,” Arvind Subramanian told parliament.
“In the case of the prime minister, we have a scenario of the government running out of money.”
The economy contracted in December after the Reserve Bank of India slashed its benchmark interest rate from 4.5 percent to 3.25 percent, citing weak consumer spending and weak corporate investment.
The cut has since been extended, and Indian stocks are expected to rebound.
The prime minister is likely to announce a series of measures to boost the economy in the coming months, but the government will also have to contend with a looming debt crisis.
It will likely have to seek foreign loans to help prop up its struggling economy.
Subramani said the government was also seeking to make reforms to make it more attractive to overseas companies and foreign investors.
India has been hit hard by the global financial crisis and a slump in the price of oil.
In the third and fourth quarters, the country is expected only to have a little more than a 0.2 percent rise in GDP, down from 0.3 percent in 2017.
Inflation, which has been rising, is expected in 2019 to be around 3.5 per cent, up slightly from 3 percent in 2019.
India’s stock market, which had a record high of 4.8 trillion rupees ($77 billion) in September, is now projected to fall to 1.6 trillion rupee ($76.5 million), according to Bloomberg.
“We are facing the biggest shock in the economy, as well as the biggest uncertainty,” said Naveen Bhagat, an economist with Nomura Holdings, a Japanese bank.
“It is the second major shock in a row.”
“The stock market has taken a major hit as a result of the shock and uncertainty, and is now in a downward spiral,” said Ashish Pandey, a chief investment officer at M&G Asset Management.
“The market is now trading at below-finance levels.”