India’s economy has posted the best GDP growth numbers in two years, retaining its crown as the world’s fastest-growing major economy.
Gross domestic product grew by 8.2% in the quarter ending in June, an increase from the 7.7% growth in the previous quarter, and a significant jump from the 5.5% rise compared to a year earlier.
The Indian government attributed to the rise to an uptick in consumer spending, expanding construction activity, and corporate investment.
But there are concerns that the strong numbers come ahead of an economic slow down as the rupee hit a record low against the dollar.
The rupee has lost more than 10% of its value this year, making it the worst performing currency in Asia. A resurgent dollar combined with the outflow of capital from emerging markets such as Turkey have compounded the rupee’s devaluation.
A cheap rupee is also expected to weigh in on the country’s imports, especially that of oil, driving up the costs for what is one of the world’s top energy importers.
The Indian central bank was forced to hike interest rates twice to 6.5% in the past three months, as inflation continues to hover above the target rate.
The country is also struggling with high unemployment, as rigid labor laws and slow pace of economic reforms result in a poor environment for job creation. Earlier this year, a government announcement of 90,000 vacancies at Indian Railways triggered 28 million applicants, highlighting the lack of available jobs for India’s expanding workforce.
Unemployment issues are expected to pose a problem for Prime Minister Modi, who is running for re-election early next year. His campaign promise to create 10 million jobs a year has yet to deliver credible results.
Furthermore, analysts fear that a widening fallout from the U.S.-China trade war may negatively impact the Indian economy’s growth prospects.
The world’s two largest economies have engaged in a tit-for-tat exchange of tariffs on goods totaling more than $50 billion. U.S. President Donald Trump has announced that the country is preparing to hit China with additional tariffs on $200 billion worth of Chinese goods, triggering investor concerns that it will drag down global trade volume.