India's economy grew at the slowest pace in nine years during the quarter ended March 2012 as manufacturing output shrank, data published by the Central Statistics Office showed Thursday.
Gross domestic product expanded only 5.3 percent from a year ago, marking the fourth successive quarter of slowdown. Economists had expected the annual growth rate to remain at 6.1 percent, unchanged from the December quarter. During the March quarter of 2011, GDP was up 9.2 percent.
The manufacturing sector contracted 0.3 percent annually during the March quarter, reversing the 0.6 percent growth in the previous three months. The annual growth in construction fell to 4.8 percent from 6.6 percent.
Likewise, output in the agriculture, forestry and fishing rose at a slower pace of 1.7 percent, down from the previous quarter's 2.8 percent.
Meanwhile, mining and quarrying rose 4.3 percent after easing 2.8 percent in the previous three months. The financial services sector growth gained strength, up 10 percent annually.
The slowdown in the March quarter led to a downward revision of the full year growth for 2011-12.
According to the latest official data, GDP advanced 6.5 percent, down from the 6.9 percent expansion estimated in February. Also, the rate was dramatically slower than the 8.4 percent expansion forecast by economists.
The Reserve Bank of India projects 7.3 percent growth for 2012-13. The Chairman of the Prime Minister's Economic Advisory Council Chakravarthy Rangarajan has reportedly projected 6.5 percent to 7 percent growth for the current fiscal year, today.
A sharp fall in foreign investment has taken the Indian rupee to record low against the U.S. dollar in the midst of widening fiscal and current account deficits. The weakness in the currency and the rise in oil prices will push inflation to higher levels, ultimately limiting the capacity of the central bank to act.
Given the dire circumstances, India's investment grade rating is also under the risk of a downgrade. While cutting the country's rating outlook to 'Negative' in April, Standard & Poor's warned that there is one in three chances of a rating downgrade. The agency expects only modest progress in fiscal reforms in the coming years.
Other major emerging economies in Asia also showed a slowdown in growth. The Chinese economy grew 8.1 percent during the first three months of 2012, the weakest pace in nearly three years.
by RTT Staff Writer
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