India GDP Growth Weakest In More Than Two Years
2011-11-30 11:13:47
India's economic growth eased to the weakest level in more than two years in the July to September period, hurt by a contraction by the mining sector and a sharp slowdown in manufacturing output, government data showed Wednesday.
The gross domestic product grew 6.9 percent year-on-year in the July-September period of 2011-12, weaker than the 7.7 percent expansion in the June quarter. This was, however, slightly better than economists' expectation of 6.8 percent growth.
The mining sector contracted 2.9 percent year-on-year, following 1.8 percent growth in the preceding quarter. The growth in manufacturing output eased sharply to 2.7 percent from 7.2 percent in the previous three months.
Farm output rose 3.2 percent for the same period, down from the previous quarter's 3.9 per cent growth. Economic activities relating to electricity, gas and water supply increased 9.8 percent, while the construction sector grew at an improved rate of 4.3 percent.
Investment climbed 30.5 percent from a year earlier, while consumer spending grew at a weaker pace of 59.5 percent. Government spending rose 10.7 percent, almost steady compared to the prior quarter.
The weaker growth rate indicates that high inflation and rising interest rates along with the global financial jitters are clearly taking their toll on the economy.
The Reserve Bank of India, or RBI, has hiked rates 13 times since March 2010 to contain inflation. According to official figures, India's inflation was at 9.73 percent in October.
Earlier this month, the RBI signaled further monetary tightening in December, with Governor Duvvuri Subbarao saying that further monetary action may still be warranted to anchor inflation expectations, in the face of sustained high food inflation.
According to him, inflation must be brought down to 5 percent and then even lower, consistent with India's broader integration into the global economy.
Meanwhile, reports quoted Finance Minister Pranab Mukherjee as saying on Wednesday that the economy is expected to grow 7.3 percent in the year ending March 2012. He also said that the lingering debt crisis in the Eurozone is hurting India's growth prospects.
Last month, the RBI lowered its baseline projection of economic growth for 2011-12 to 7.6 percent from 8 percent. It also pointed out that the risk to the growth projection was on the downside mainly on account of the slowing down of the global economy and moderating domestic demand.