The data came in much lower than analysts expected, with predictions ranging from 5.5 percent to 7.3 percent. The result will surely come as a disappointment to Indian lawmakers who recently claimed that their economy could begin to rival China’s by surging into double digit growth.

In terms of live forex chart action, the rupee fell on Thursday to a record low of 56.50 per dollar off the back of the report which highlights a number of concerning factors influencing the stunted growth. "The data highlights the unusual degree of weakening of the country's economy, likely driven by poor investment and widening trade gap," said Dariusz Kowalczyk, an economist at Credit Agricole CIB in Hong Kong.

"The data also poses a dilemma for policymakers, as they have no fiscal room to stimulate growth, while monetary easing scope is very narrow, at least for now, due to rebounding and high inflation."

“Double whammy”

The data showed that the manufacturing sector shrank 0.3 percent in the quarter compared with a year earlier, while the farm sector grew 1.7 percent. As is the story with many other nations, analysts are suggesting that the impact of the euro zone debt crisis is continuing to impact on India’s potential for growth, but that other factors are also at play here. The nation’s sky-high inflation rate has averaged 9.2 percent since the beginning of 2010 and has been combined with a reduction in real wages that is thought to be crippling citizen’s spending power.

 "It's beyond anything that we would have imagined," said Samiran Chakraborty, head of research at Standard Chartered in Mumbai (pictured). "It looks to me that the consumption side of the story is now faltering. Real wages are falling," he said. "The consumption slowdown along with the investment slowdown has been a double whammy for the GDP number." Looking at the data this morning, a fellow expert at Standard Chartered told Reuters that “a rate cut is now a given” given the “shocking state of the data.

Underperformer

Asia's third-largest economy is generally regarded as an underperformer in world markets, with many analysts concerned that the current scandal-tainted coalition are too nervous to push through tough measures which could see India fulfil its much-touted growth potential.  

The Reserve Bank of India and the International Monetary Fund are just two of the organisations locked in battle with the government, urging them to push through promised refroms which would help to kick-start growth.

Manufacturing, a key source of jobs, also fell 0.3 percent in the March quarter from a year earlier, another flagging statistic which some economists are now suggesting is not merely the result of circumstance. "India's growth story has clearly derated," said Citigroup economist Rohini Malkani, before the data came out. "A lot of it has been self-inflicted."

Sarah Cox, Staff Writer