Nirmala Sitharaman is now the Finance Minister

Nirmala Sitharaman is now the Finance Minister

India has lost its spot as the world's fastest-growing economy after it grew more slowly than expected in the first three months of 2019.

In the first decision taken after assuming charge of the new government, Prime Minister Modi on Friday approved a major change in the "Prime Minister's Scholarship Scheme" under the National Defence Fund.

While the economy grew at 5.8% in the January-March period, falling behind China's pace for the first time in almost two years, the unemployment rate rose to a multi-year high of 6.1% in the 2017/18 fiscal year.

"Emergence of clarity is what was important, and now narrative in markets will be about the economic policies that will be adopted to revive and stimulate the slowing economy", he said.

Ironically, Sushma Swaraj, foreign minister in the previous government whose name is not on the list of ministers in the new Modi government, was the one who had introduced Nirmala to the BJP.

"With limited fiscal maneuverability it remains to be seen how she can inject a strong dose of fiscal stimulus to revive animal spirits", Bodke added.

But the latest figures, which show the slowest growth rate in 17 quarters, mean India's growth rate has fallen behind China for the first time in almost two years.

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Sitharaman will inherit a slowing economy.

The Reserve Bank of India is now expected to cut interest rates next month.

But it puts an onus on him to deliver reforms that can truly unlock growth, which had waxed and waned during his first five years in office.

Several indicators - automobile sales, rail freight, petroleum product consumption, domestic air traffic and imports - indicate a slowdown in domestic consumption.

"The new government will first have to address the demand slowdown, which, in turn, requires revitalising the credit channels", said Rupa Rege Nitsure, chief economist at L&T Financial Holdings in Mumbai.

"Big-bang" economic programmes in the first 100 days of Modi's second term could focus on privatisation of state assets and relaxation of labour and land rules for businesses, a top official at the government's main think-tank told Reuters. Capital investment growth slowed to 3.6 percent from 10.6%, government data showed.

But, it should start to turnaround in the third quarter, he said.

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