Indian economic growth slipped in the last quarter of its fiscal year, posting a rise of 7.8 per cent as an aggressive series of interest rate hikes slowed activity, official data showed on Tuesday.

Giving figures for the full fiscal year to March 2011, India's Central Statistical Organisation reported expansion of 8.5 per cent, an increase from the 7.4 per cent of 2009/2010.

The performance in the fourth quarter was below the expectations of economists who had projected that Asia's third-largest economy would grow by 8.2 per cent, according to a poll by Dow Jones Newswires.

The Indian central bank has raised interest rates nine times in the past 15 months to curb stubbornly high inflation running at 8.6 per cent that has caused huge hardship to hundreds of millions of poor people.

Indian Prime Minister Manmohan Singh warned at the weekend that the country's economic growth in 2011/12 would likely miss the government's nine per cent target as rising commodity prices, especially oil, and continuing inflation slow activity.

India's central bank earlier this month lowered its growth projection to eight per cent, a forecast echoed by many private economists.

"The process of taming inflation will ultimately be damaging to growth," said Morgan Stanley economist Chetan Ahya in a commentary published Tuesday.

Controlling prices is an overriding priority for Singh's Congress-led government, with poorer households -- the backbone of the Congress party's support -- especially hard-hit by rising food and fuel costs.

At the same time, the government says it needs double-digit economic growth to overcome crushing poverty in the nation of 1.2 billion people.

High growth is essential to fund social projects such as the proposed Right to Food Act to feed India's poverty-stricken millions, ministers have said.

But India's central bank has said short-term economic growth might have to be sacrificed in the fight against inflation.

channelnewsasia.com