India’s economic growth falls further to 7.6%

India’s economic growth declined to 7.6% for the second quarter of this fiscal, leaving industry with the hope that policy measures taken over the past month will avert a further fall and help revive manufacturing.

The country’s growth was 7.9 percent during the first quarter of the fiscal (April-June) and 9.2% during the second quarter of 2007-08 (July-September), as per data on gross domestic product (GDP) released by the Central Statistical Organisation (CSO).

Prime Minister Manmohan Singh, Finance Minister P. Chidambaram and Reserve Bank of India (RBI) Governor D. Subbarao have projected the Indian economy to expand by 7-8% during the current fiscal year ending March 31, 2009.

The main reason for the fall in the overall economic expansion during the period under review (July-September, 2008) was a low, 5-percent growth in the manufacturing sector, as opposed to 9.2 percent in the like period of last fiscal.

Similarly, agriculture also logged a significantly lower growth of 2.7%, as opposed to 4.7%, while hospitality, transport and communications expanded the best 10.8 percent against 11 percent during the second quarter of fiscal 2007-08.

What has, however, come as a surprise was the 9.7% growth ion construction, as opposed to 11.8% in the corresponding period of the previous year.

Financial services, realty and business services also registered a notable growth of 9.2%, against 12.4%, given the circumstances where real estate companies have been complaining about a major slowdown.

“Economic slowdown in India has been on since June. The real impact of global economic slowdown on the Indian economy will be actually felt in third and fourth quarters,” said Sri Ram Khanna, professor and head of department in Delhi School of Economics.

Dalip Kumar, head of projects at the National Council for Applied Economics Research (NCAER), an economic think-tank, said economic depression in US had begun showing its impact on the overall industrial growth in India.

“Our industrial growth has been hit and would continue to deteriorate further next year. This has largely contributed to the downfall of India’s economic growth,” Kumar told IANS.

The Associated Chambers of Commerce and Industry (Assocham) said that the 7.6% growth was satisfactory given the circumstances and expressed confidence that the same would be maintained in the remaining months of the current fiscal.

“Slowly and gradually, interest rates, inflation and input costs are falling down whose collective reflection will fall on the overall growth of GDP,” the chamber’s president Sajjan Jindal said in a statement.

Another industry lobby, PHD Chamber of Commerce and Industry, presented a somewhat different picture. “The slowdown in is shows that our economic indicators have started weakening with some segments being affected more than others,” the chamber said.

“Investment in infrastructure should be increased and an early completion of ongoing projects be effected on a war footing. Attention should be paid on building rural infrastructure to rejuvenate demand in the countryside.”