GBP/INR: Rupee is Dragged Down by India’s Muted GDP Growth

GBP/INR continues to grow after India published its long-awaited gross domestic product growth report. Currently, the pair is trading at 92.732, up 0.07% as of 6:30 AM UTC.

India’s economy saw its weakest growth in over six years. Thus, GDP rose only 4.5% in the three months to September compared to the same period in 2018. The previous quarter saw a growth of 5%. The reading is slightly below economists’ expectations, with some rating agencies anticipated GDP growth of 4.7% for the quarter.

The economic performance shows once again that the reforms implemented by Prime Minister Narendra Modi have little effect.

The slowdown is driven by lower consumer spending, business investment, and exports. Reserve Bank of India and the government worked in tandem to stimulate the economy, but without much success.

The RBI has cut the interest rates several times by an aggregate 135 basis points this year to the lowest level since 2009. Economists anticipate more easing measures next week. Elsewhere, the government has cut corporate taxes, merged banks, established a special real-estate fund. The government also initiated the largest privatization scheme in over a decade.

India is obliged to reach economic growth of about 8% a year in order to create enough jobs for the young population that seeks to join the labor market each year. However, many economists agree that the current slowdown would continue for one year or two, calling for urgent reforms.

Kunal Kundu, India economist at Societe Generale in Bangalore, commented:

“At this point in time, direct fiscal intervention and/or cut in personal income tax rates to put in more money in the hand of consumers appears to be the only short-term solution.”

On Saturday, India’s finance minister said that the country would announce a series of infrastructure projects worth $1.39 trillion to boost the economy.

The rupee tries to narrow losses after India’s manufacturing activity rose last month, driven by new orders and output. However, factories were not positive about the future, cutting jobs for the first time since March 2018.

The Nikkei Manufacturing Purchasing Managers’ Index increased to 51.2 in November from 50.6 in October. Analysts expected a decline to 49.8.

Currencylive.com is a news site only and not a currency trading platform.

Currencylive.com is a site operated by TransferWise Inc. (“We”, “Us”), a Delaware Corporation. We do not guarantee that the website will operate in an uninterrupted or error-free manner or is free of viruses or other harmful components. The content on our site is provided for general information only and is not intended as an exhaustive treatment of its subject. We expressly disclaim any contractual or fiduciary relationship with you on the basis of the content of our site, any you may not rely thereon for any purpose. You should consult with qualified professionals or specialists before taking, or refraining from, any action on the basis of the content on our site. Although we make reasonable efforts to update the information on our site, we make no representations, warranties or guarantees, whether express or implied, that the content on our site is accurate, complete or up to date, and DISCLAIM ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. Some of the content posted on this site has been commissioned by Us, but is the work of independent contractors. These contractors are not employees, workers, agents or partners of TransferWise and they do not hold themselves out as one. The information and content posted by these independent contractors have not been verified or approved by Us. The views expressed by these independent contractors on currencylive.com do not represent our views.