By IANS,
New Delhi : India’s economic growth slipped to 7.9 percent during the first quarter of this fiscal from 9.2 percent for the like period of the previous year amid industry’s concerns over the impact of central bank’s tight monetary policy.
The growth during the first quarter was the lowest in three-and-a-half years and much below the 8.8 percent expansion registered in the previous quarter, showed data released by the Central Statistical Organisation (CSO) Friday.
The data came against the backdrop of concerns expressed by the Indian industry that the tight monetary policy adopted by the central bank to tame inflation and the high interest rates were affecting manufacturing growth.
The CSO data showed that a major slip was in manufacturing, which saw the growth rate slow down sharply to 5.6 percent, as against 10.9 percent during the first quarter of previous year.
Even the farm sector that was performing well and pushing up the country’s Gross Domestic Product (GDP) saw the growth slip to a mere 3 percent, as against 4.4 percent in the first quarter of the previous fiscal year.
Among the remaining six sectors, only construction was able to perform notably better during the period under review with a growth of 11.4 percent, as against 7.7 percent in the previous year.
“In view of the interest rates hiked by the Reserve Bank, the growth rate may take some downward direction though with less severe impact,” the Associated Chambers of Commerce and Industry (Assocham) said in a statement.
“The first quarter performance will help in instilling investor confidence which has moderated from some time. Yet, the monetary tightening by the centre bank may play spoilsport to the growth party,” chamber president Sajjan Jindal said.
The Federation of Indian Chambers of Commerce and Industry (Ficci) urged the government to introduce measures to give a push to the economy, as it expected India’s inflation rate, now at around 12.5 percent, to ease later in the year.
“Apart from a review of interest rates, Ficci would suggest re-introduction of some incentives for encouraging fresh investments. The higher interest rate has dampened the enthusiasm of the private sector to commit fresh investments.”
The Confederation of Indian Industry, another apex chamber, predicted a growth of over eight percent for the current fiscal. “The pipeline of investments remains strong and there were no shortage of funds for supporting the investment programme.”
Albeit lower, the expansion during the first quarter has been in line with the predictions made by various institutions and expert panels including the 7.7 percent growth forecast by the Prime Minister’s Economic Advisory Council earlier this month.
“The downside risk to our growth expectations in 2008-09 is primarily from a further deterioration in global conditions with attendant impact on India – be it in the sphere of oil prices or capital markets,” the panel said in a report.
In a similar vein, India’s central bank had also pruned the growth projection to 8 percent, from 8.5, percent because of global and domestic developments when it reviewed its monetary policy for the current fiscal late last month.
And earlier this month, Finance Minister P. Chidambaram had also expressed optimism that the Indian economy will continue to grow at a fast clip as the fundamentals of the economy were strong.
“The growth will remain around 8 percent,” he said earlier this month. “There is no slowdown in the economy. There is no slowdown in any other sector. There is no slowdown in infrastructure and new projects.”