India's economic growth slowed sharply in the first quarter of the 2016-17 financial year, official data showed Wednesday, missing expectations but raising hopes of an interest rate cut. 

Gross domestic product expanded 7.1 percent year-on-year in the three months from April-June, down from the stellar growth of 7.9 percent in the preceding quarter, according to the statistics ministry. 

The numbers also fell short of economists' expectations, with most having predicted a slight slowdown in GDP growth to around 7.6 percent for the quarter. 

However, India retained its place as the world's fastest-growing major economy, with growth having outpaced Asian rival China for more than a year.

"We were hoping for a stronger number," Shubhada Rao, chief economist at Yes Bank in Mumbai told AFP, adding that sluggishness in the construction and mining sectors had weighed on growth.

"There is room for one rate cut from the central bank," she said.

India's rosy GDP figures have drawn questions since the government in January 2015 revised its base year to 2011-12 and introduced new methods of calculating expansion which it said were closer to international standards.

Ashutosh Datar, economist at IIFL Institutional Equities, described the growth figure as "disappointing".

"We expected it to remain stable at 7.6 or 7.7 percent," he said.

- Roadblocks -

The underwhelming data came as US Secretary of State John Kerry said India's economic expansion would only be able to maintain its impressive pace if its bureaucracy ceased to be "an expert in setting up roadblocks".

Speaking on a visit to New Delhi, Kerry said red tape and a lack of transparency continued to deter entrepreneurs and foreign investors.

"Even though we are witnessing impressive gains in India's economic growth, there is still a real question as to whether we are doing so quickly enough," he said.

Prime Minister Narendra Modi has made kickstarting growth a priority since taking power in 2014. Investors have praised recent reforms including a bankruptcy code and a new Goods and Services Tax that will create a single market across India.

However many investors have been frustrated with the pace of reforms in the world's second-most populous nation. 

Inflation, however, appears to have been largely tamed, falling from double-digit levels to around six percent on the watch of outgoing Reserve Bank of India governor Raghuram Rajan.

The government earlier in August signalled a message of continuity when it appointed RBI insider Urjit Patel to take over the reins when Rajan steps down on September 4 after three years at the helm.

India's GDP figures have puzzled many economists, who find them hard to square with other indicators such as industrial output or bank lending which show more sluggish activity on the ground.

Shilan Shah, India economist at Capital Economics, wrote in a note Wednesday that the figures "continue to overstate the strength of the economy", suggesting growth is on a par with "boom years between 2006 and 2011".

"This is scarcely believable, particularly when we try to align the GDP data with other indicators of activity," Shah wrote.

India's top statistician admitted in an interview in June that the data were "imperfect" but defended the figures against accusations they vastly overstate the performance of the supposedly booming economy.

Source: AFP