India's Economic Gloom Continues

In the three months that ended in June, the GDP growth of India languished around its lowest level in three years. The economy grew 5.5% in the quarter, government data indicated. That was just above the 5.3% posted in the previous quarter and slightly better than consensus expectations.

Weakened demand in the West has hampered exports, but overspending and a lack of reforms took the heaviest toll on the economy. Ratings agencies Fitch and Standard & Poor’s have threaten to downgrade India’s sovereign ratings to junk. And the Reserve Bank of India remains hawkish in the face of stubbornly high inflation.

The lack of growth is further bad news for Prime Minister Manmohan Singh, who struggles to escape a series of political scandals that have paralyzed his economic agenda. The government is struggling with the main opposition Bharatiya Janata Party (BJP) over sweetheart coal deals. The the BJP has refused to allow parliament to function until Singh quits, leaving a raft of bills, including a number of important economic reforms, bogged down in the legislature.

Poor monsoon rains have added to the economic gloom.