The Indian economy grew at a faster than expected pace during the June quarter, help by construction and services activity, data from the Central Statistics Office showed Friday.
Gross domestic product advanced 5.5 percent year-over-year in the June quarter. The growth rate was slightly faster than the prior quarter's 5.3 percent expansion and the 5.2 percent growth estimated by economists. During the same period of last year, the growth rate was 8 percent.
The construction sector registered 10.9 percent growth from a year ago, and financing insurance, real estate and business services expanded 10.8 percent.
The farm sector grew 2.9 percent annually. The mining and manufacturing sector logged in weak growth, with mining output edging up 0.1 percent and manufacturing rising only 0.2 percent.
Despite the forecast beating growth for the June quarter, economic growth remains anemic. Industrial output dipped 1.8 percent in June and Purchasing Managers' survey revealed a slowdown in manufacturing activity in July.
At the same time, inflation is preventing the central bank from lowering its key rates. The Reserve Bank of India last reduced rates in April by a 50 basis points.
The RBI sees 6.5 percent growth for 2012-13. The central bank expects slower global growth as well as a potential slowdown in the service sector expansion to possibly act as a drag on the economy.
Lowering policy rates in the current situation will only aggravate inflationary impulses without necessarily stimulating growth, the bank said in July.
A slew of banks and brokerages have cut their forecast for India's economic growth recently. Citigroup and CLSA early this month downgraded their view of the country's growth for the current fiscal year to 5.4 percent and 5.5 percent, respectively. CRISIL trimmed its 2012-13 growth forecast for India on Tuesday to 5.5 percent from 6.5 percent.
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