Investors reacted to concerns of the deepening economic slowdown, as oil prices surged and uncertainty over the crisis in Syria rippled throughout the region.
Growth on the quarter slowed to its weakest since 2009, increasing pressure on Prime Minister Manmohan Singh to take more drastic measures to turn around the slide of Asia's third-largest economy.
Singh defended his economic record, saying just hours before the release of the quarterly GDP numbers that "the fundamentals of the Indian economy continue to be strong," despite "a difficult economic situation."
Last year, the parliament lifted restrictions on direct foreign investment, but economists say the country needs to implement even greater structural reforms to jumpstart growth.
“The government is going to struggle to turn around the economy until it gets the deficit, consumer-price inflation and the exchange rate under control,” said Prasanna Ananthasubramanian, an economist at ICICI Securities Primary Dealership Ltd. in Mumbai. “This may take some time, and growth is at risk in the meantime.”