India's economic growth dips to 7.9 per cent

DOWN BUT NOT OUT: India's slipping growth is due to the tight economic policies that are framed to fight inflation

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New Delhi: India's economic growth slipped to 7.9 per cent during the first quarter of this fiscal from 9.2 per cent for the corresponding period of the previous year.

This is amidst concerns over the impact of the Reserve Bank of India (RBI) of India's tight monetary policy.

The growth during the first quarter was the lowest in three-and-a-half years.

It is also much below the 8.8 per cent expansion registered in the previous quarter.

This is as per the data released by the Central Statistical Organisation (CSO) on Friday.

The data came against the backdrop of concerns expressed by the Indian industry over the current financial policies.

There have been worries that the tight monetary policy adopted by the RBI to tame inflation and the high interest rates were affecting manufacturing growth.

The CSO data showed that a major slip was in manufacturing.

Ironically, it was the manufacturing industry which saw the growth rate slow down sharply to 5.6 per cent, as against 10.9 per cent 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 per cent, as against 4.4 per cent 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 per cent, as against 7.7 per cent in the previous year.

Albeit lower, the expansion first quarter has been in line with the predictions made by various institutions and expert panels.

It also matches the prediction of 7.7 per cent 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, the RBI had also pruned the growth projection to 8 percent, from 8.5, per cent .

The RBI had made these based on 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 per cent," 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."

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