India's economic growth slowed to a three-year low in the September quarter on weak farm and manufacturing output, underlining the importance of implementing reforms to kick start the third largest Asian economy.
Gross domestic product grew 5.3 percent from the preceding year, the Central Statistics Office reported Friday. The annual growth rate matched economist expectations, but represented a slowdown from the 5.5 percent expansion in the quarter ended June.
The farm sector grew 1.2 percent, down from 2.9 percent a quarter ago. Meanwhile, mining output growth advanced to 1.9 percent from 0.1 percent.
At the same time, manufacturing output climbed 0.8 percent following a 0.2 percent rise in the prior quarter. The growth in construction output eased to 6.7 percent from 10.9 percent.
Although reductions in interest rates could spur investment, the central bank has signaled rate cuts only in the March quarter and only if inflation slows. In October, the Reserve Bank of India trimmed its GDP growth projection for 2012-13 to 5.8 percent from 6.5 percent.
Global investment banking and securities firm Goldman Sachs forecasts India's growth to pick up to 6.5 percent in 2013.
In an attempt to underpin economic growth and reduce pressure on its rating, the government took hard decisions on allowing foreign direct investment in insurance and aviation and opened up the retail sector to foreign supermarket. It also reduced the subsidy on diesel and limited the supply of subsidized cooking gas to cut country's current account gap.
The country is facing the risk of losing its investment grade from rating agency Standard & Poor's. Nonetheless, Moody's said this week its rating outlook on India remains stable.
Slow export demand as well as weak economic growth is limiting the scope of reducing India's huge budget deficit. Finance Minister Palaniappan Chidambaram plans to cut the shortfall to 5.3 percent of GDP in the year through March 2013.
by RTT Staff Writer
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