GDP in India hits 7.9% in the first quarter- Slowest in three years

In the first quarter of the current fiscal year, the Indian economy grew by 7.9%, the slowest in the past three and a half years. The economy had grown by 9.2% in the first quarter of 2007-08. Although growth was seen in agriculture, industry and services, a sharp drop in growth in manufacturing and electricity generation is seen to have pulled down overall growth. Manufacturing stood at almost half of what it was in the last fiscal year. Growth in investment expenditure moderated to single digit for the first time since the first quarter of 2002-03. This could be a result of the sky rocketing interest rates and increased input costs.

It seems contradictory however that finance minister P. Chidambaram is confident that for the entire fiscal year the economy will grow at close to 8% due to a high degree of savings and investment that the country is witnessing, considering there has been a significant drop in investment. Economists however are of the opinion that the slow down in the first quarter was in sync with the Reserve Bank of India’s aim to bring down growth to contain inflation which stood at 12.4% for the week ending August 16^th, 2008.