Concerns over India's slowing economy have persisted throughout the summer, with no signs of alleviation on the horizon.
On Friday, an advisory panel to India's prime minister forecasted that the economy will grow at a rate of 6.7 percent this year. The number is a sharp drop from previous reports, as the economy had been projected to grow at a rate of 7.6 percent as recently as February.
The steep decline can be attributed to a number of factors, according to analysis from a number of economists and politicians. Council Chairman Chakravarthy Rangarajan said in a news conference that earlier predictions lacked the foresight to truly examine India's economic climate.
"I think the external situation turned out to be worse than what we had originally thought," Rangarajan said. "Therefore, the growth rate came down much lower [from previous estimates]."
India's disappointing economic growth is not a new phenomenon. Last year, the GDP slowed to a rate of 6.5 percent, the lowest in a decade. After initial hopes that this decline was simply an aberration, a change in sentiment in recent months indicates that this year will be a continuation from the last.
This year, the economy was hampered by a period of unseasonable weather, according to a report by in the Wall Street Journal. Crops have not faired as well this season due to rainfall levels 15 percent below average. As a result, food prices have inflated far above normal amounts. The advisory panel predicts that the coming year will see food prices inflate between 6.5 and 7 percent, far beyond the central bank target, which is around 5 percent.
High inflation could have a negative effect on consumers, and thus could worsen India's economic situation. However, negative reports do not necessarily result in poor market performance. Investors and financial advisors interested in India ETFs should examine the fundamentals of underlying stocks before investing.
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