The Indian government estimates the economy to grow at its weakest pace in three years during the financial year ending March 2012, bolstering the case for an interest rate reduction by the Reserve Bank of India.
Gross domestic product is estimated to rise 6.9 percent during the financial year ending March 2012, slower than the 8.4 percent growth recorded in fiscal 2010-11, the Central Statistics Office said in a statement on Tuesday.
Growth will likely slow in agriculture, forestry and fishing, manufacturing and construction, the agency said. Economic activity in mining and quarrying sector is estimated to fall 2.2 percent.
The farm sector growth is estimated at 2.5 percent during fiscal 2011-12, much weaker than 7 percent in the previous year. The service sector growth is seen at 11.2 percent compared 11.1 percent in fiscal 2010-11.
Manufacturing is predicted to grow 3.9 percent during 2011-12 as against the 7.6 percent expansion during 2010-11. Investment is estimated to expand 31.9 percent during 2011-12 compared to 32.5 percent growth recorded in 2010-11.
Last month, the Indian central bank slashed its cash reserve ratio by 50 basis points in its first easing move since 2009, to inject INR 320 billion liquidity into the banking system.
At the same time, the RBI opted to maintain its key interest rates for a second time saying that current inflation trajectory made it "premature to begin reducing the policy rate."
The RBI has raised rates 13 times since March 2010 to contain inflation. The central bank expects the latest policy actions to ease liquidity conditions, mitigate downside risks to growth and continue to anchor medium-term inflation expectations.
The central bank expects a GDP growth of 7 percent for fiscal 2011-12. Meanwhile, RBI Deputy Governor Subir Gokarn recently hinted at another cut in the CRR to unlock banking funds, due to persistent pressure on the liquidity situation.
The International Monetary Fund forecast the Indian economy to expand 7 percent this year and 7.3 percent in 2013.
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