NEW DELHI (Reuters) – India’s economy lost momentum in the final quarter of 2018, reducing the annual rate of growth to 6.6 percent, the slowest pace in five quarters and much less than expected.

The slowdown may be bad news for Prime Minister Narendra Modi as he seeks a second term in office at a general election due by May. He is already under pressure from declining farm incomes and weak jobs growth.

It could also prompt the nation’s central bank to reduce interest rates at its April meeting, after cutting 25 basis points off its benchmark rate in February.

A Reuters poll of economists had forecast growth of 6.9 percent for the October-December quarter, compared with a downwardly revised 7.0 percent in July-September.

Weaker consumer demand and lower government spending were blamed for the slowdown. Economists said the economy could slow further in the current quarter, the last of the fiscal year, citing weakening global growth and conflict with Pakistan.

The two countries launched tit-for-tat air strikes after a Feb. 14 suicide car bombing that killed at least 40 Indian paramilitary police in Indian-controlled Kashmir.

Aurodeep Nandi, India economist at Nomura in Mumbai, said the GDP growth numbers showed a cyclical slowdown was getting entrenched.

“Going ahead, we do expect further moderation on tighter financial conditions, weaker global demand and political uncertainty,” Nandi said. “The dullness of growth prospects serves as a recipe for a 25-basis-point rate cut in April.”

The Statistics Ministry revised its estimate for economic growth in the fiscal year ending March 31 to a five-year low of 7.0 percent from an earlier estimate of 7.2 percent. That implies the January-March quarter growth will fall as low as 6.1 percent, economists said.

(Graphic: India’s annual economic growth – tmsnrt.rs/2UcxJr0)

The growth rate in the last quarter was still faster than China’s 6.4 percent, but India’s economy has decelerated from a revised 8.0 percent last April-June.

(Graphic: India’s Oct-Dec 2018 GDP growth lowest in 5 qtrs – tmsnrt.rs/2Ub2TyN)

Consumer spending, which accounts for nearly 60 percent of the economy, slowed to an 8.4 percent rise in the October-December quarter, compared with a revised 9.9 percent increase in the previous quarter.

Gross fixed capital formation – which include spending on roads, ports, airports and power plants – rose 10.6 percent compared with a revised 10.2 percent annual increase in the previous quarter.

Manufacturing grew 6.7 percent annually, the data showed. Services, including construction, grew 7.6 percent from a year earlier.

RURAL DISTRESS

Opposition parties have criticized Modi and his ruling Bharatiya Janata Party for not doing enough to help manufacturing or to created enough jobs for the 15 million to 20 million youths entering the job market each year.

Growing signs of weakness in the economy, most alarmingly in rural communities where incomes have been hit by falling farm prices, forced Modi to increase state spending this month and make direct cash transfers to farmers.

That could help growth in coming quarters, but it would also increase the government’s debt.

Farm output grew 2.7 percent year-on-year in the October-December quarter compared with a revised 4.2 percent in the previous quarter, the data showed.

In real terms, federal spending rose 6.5 percent year-on-year in the last quarter, compared with 10.9 percent in the previous quarter.