By Penelope MACRAE

NEW DELHI (AFP) – India reported Friday a second straight year of sub-five percent growth, underscoring the challenges facing new right-wing Prime Minister Narendra Modi to revive Asia’s third-largest economy.

The economy grew by 4.7 percent in the financial year to March 2014, below the 4.9 estimate of the previous left-leaning Congress booted out in elections earlier this month by voters angry over economic slowdown, soaring consumer inflation and widespread corruption.

“India’s economy is devoid of momentum as Modi takes charge,” said Capital Economics analyst Miguel Chanco.

The figures from the Central Statistical Office are “a reminder of the economic headwinds that will make a sudden shift” in economic performance unlikely, Chanco said.

The market consensus forecast for economic growth in the coming year to March 2015 is 5.3 percent.

Growth has crumbled from nearly double-digit rates just three years ago — a level analysts say India must reach again to generate jobs for its vast young population.

The economy expanded by a decade low of 4.5 percent in the previous year.

“A lot of work needs to be done in the economy before growth can pick up again,” Nomura Asia interest strategist Vivek Rajpal said.

The economy grew by 4.6 percent in the final fourth quarter to March 31 from the same period a year earlier.

Persistent tightening of both monetary and fiscal policy to curb wage-eroding inflation has fuelled downward growth pressure.

In one piece of good news, India’s fiscal deficit for the last fiscal year was 4.5 percent of gross domestic product, slightly below an earlier official estimate of 4.6 percent, and down from the previous year’s 4.9 percent level.

Indians are looking to Modi, sworn in Monday as India’s premier and known for his fast decision-making during more than a dozen years as chief minister of prosperous western Gujarat state, to live up to his post election promise that the “good days are coming”.

Business leaders want Modi to dismantle an array of bureaucratic controls that have stalled more than $200 billion worth of investment projects, overhaul creaking infrastructure that impedes productivity, simplify tax levies and ease cumbersome land-buying rules.

Even if Modi proves to be the reformer that many hope, “the bureaucratic inefficiencies that make life so hard for businesses will not be swept away overnight”, said Capital Economics’ Chanco.

“The scale of the backlog of stalled investment projects will be a key yardstick of progress,” Chanco said.

– ‘Challenging time’ –

India’s new Finance Minister Arun Jaitley said earlier in the week he was taking over at a “challenging time”.

“We have to restore the pace of growth, contain inflation, and obviously concentrate on fiscal consolidation itself,” said Jaitley, who presents his first budget in July.

But international investors already seem confident of a return to better times, betting on a government with the strongest mandate in 30 years after the BJP won the first majority since 1984.

Still, with consumer price inflation nudging 10 percent, central bank governor Raghuram Rajan was expected to keep benchmark lending rates on hold at a monetary policy meeting next week.

Rajan, a former World Bank economist and a strong market reformer, says tackling inflation must be a priority for sustained growth, putting him in the firing line of the BJP which had been clamouring before the election for lower borrowing costs to spur investment.

Economists said the election has not shifted the difficult economic ground realities.

“Consumer price inflation has risen again recently and remains stubbornly high. This will keep the central bank from loosening monetary policy any time soon,” Capital Economics’ Chanco said.