New Delhi: Experts closely watching the Indian economy warns that it is heading for a slowdown, reports Bloomberg.
The report comes amid claims by several international agencies that India is the only shining place in a financially crisis driven world.
Analysts warn that inequality reduces consumer spending among the poor and the middle class.
However, this might sound bizarre considering India’s growth rate going past estimates last week at more than 7 percent for the fiscal year.
Bloomberg quoted economist Kunal Kundu of Societe Generale SA in Bengaluru saying that economy may slow down substantially as ‘consumer fatigue appears to be setting in’.
The report comes as PM Modi is seeking another term in office hopefully riding on a robust economy.
Given the situation likely to turn to a grim scenario, the central bank will cut interest rates ‘ earlier than expected’, according to the report.
This could lead India to propel global economy while major forces including China report slowdown.
India outstripped global peers in post-pandemic recovery posting 7.2 percent growth for the fiscal year through March.
Thanks to government spending and increases in services, India grew by 6.1 percent in the month ended March compared to the previous year.
The report pointed at the fall of private consumption by 3.2 percent in the three months ended March.
It is linked to the reduced spending by the urban middle class, which could raise concerns about the country’s growth, according to Rupa Rege Nitsure, chief economist at L&T Finance.
Rural population, which can contribute largely to the economy especially after a robust harvest, is facing the likelihood of El Nino, the weather pattern can bring in drought wrecking the country’s agriculture.
The report said that the country’s two-wheeler vehicle sales remain below pre-covid situation, which indicates state of demand from rural areas.
Amid this potentially bleak situation, India’s service sector is booming, tax collection hit record in April , inflation is easing and India’s foreign exchange reserves are found to be among the largest globally, according to the report.