India's economy unexpectedly slowed further to a three-year low in the quarter to the end of June, new figures show today.

The figures will be a blow to Prime Minister Narendra Modi who is facing criticism for disrupting business activity through his shock cash squeeze last year. 

India's gross domestic product grew 5.7% in the latest quarter, its slowest pace since the January-March quarter 2014, according to data released today. 

That compared with a forecast of 6.6% growth by economists in a Reuters' poll, and was slower than 6.1%growth posted in the three months from January to March. 

Modi's decision last November to scrap high-value old banknotes, in a bid to flush out the money Indians hide from the taxman, wiped out about 86% of currency in circulation virtually overnight. 

While his drive to unearth unaccounted wealth did not deliver the desired result, it pounded consumer demand in an economy where most people are paid in, and buy what they need with, cash. 

Confusion ahead of the launch of a new goods and services tax (GST) also seems to have dampened economic activity.

The slowdown was led by the manufacturing sector, which expanded at 1.2% from a year earlier compared with a 10.7% growth last year. 

The financial, insurance, property and professional services sectors also slowed to 6.4% in the June quarter from 9.4% a year ago.