The government is unlikely to implement major reforms despite "prolonged economic slowdown" in the country and may continue to focus on Hindu nationalist themes for political dividends to make up losses in recent state elections, according to the Economist Intelligence Unit.
The country's gross domestic product (GDP) growth in the first quarter was 5 per cent and 4.5 per cent in the subsequent three-months period.
According to the Economist Intelligence Unit, fiscal constraints and price pressures will preclude fiscal and monetary stimulus in the short-term.
Meanwhile, emboldened opposition-controlled state governments are likely to obstruct the progress of major projects backed by the central government, further undermining the country's growth potential, it added.
"Despite the prolonged economic slowdown (real GDP grew by just 4.5 per cent year on year in July-September), the government is unlikely to implement major economic reform.
"Instead of unpopular economic measures, the ruling Bharatiya Janata Party (BJP) is likely to maintain its focus on popular Hindu nationalist themes as it seeks to rebound from its poor performance in recent state elections," the EIU said in its report.
The government has reacted defensively to the drumbeat of poor economic data in recent months, lashing out at critics and questioning the basis of some official reports.
In response to criticism from prominent business people over the state of the economy, Finance Minister Nirmala Sitharaman warned that such rhetoric could harm India's national interest. She separately suggested in late November that India was incapable of experiencing a recession.
Officials recently scrapped a government survey that showed an unprecedented decline in consumer spending between 2011-12 and 2017-18, arguing that the methodology was flawed.
Rather than responding more robustly to the economic slowdown, Prime Minister Narendra Modi and the BJP are likely to remain focused on divisive social issues that they believe will pay political dividends, the EIU added.
Several far right groups, including some affiliated with the BJP, have long been pushing for India to be recast as a Hindu country. Since winning re-election in May 2019, the government has altered India's only Muslim-majority state by revoking Jammu and Kashmir's statehood and special status under the constitution, it noted.
Further, it also won a Supreme Court ruling that cleared the way for a Hindu temple to be built on the site of a 16th century mosque destroyed by Hindu nationalists in 1992. In addition, new citizenship legislation, seen widely as a means of denying citizenship to Muslims who lack documentation, was enacted in December, sparking nationwide protests.
"With Mr Modi strongly backing the citizenship measure in spite of the protests, the next major social measure on the government's agenda will probably be a uniform civil code. Such a measure would introduce a more progressive system of marriage and divorce, supplanting India's long standing practice of allowing Muslims to follow different practices," the report added.
While Modi's hold over the national government remains unquestioned, the BJP has lost control of five state assemblies since late 2018, setting the stage for greater acrimony between the government and independently minded state legislatures.
"The BJP is unlikely to improve its performance significantly in the state elections due in 2020. The party lost control of the mining and steel-centric state of Jharkhand on December 23 and faces an uphill battle to defeat the anti-corruption Aam Aadmi Party in elections in New Delhi scheduled for February 2020," the EIU noted.
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