Slowdown pulls down India's growth to 5.3 percent

by Sanjay Jha | February 27, 2009 at 12:39 am

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The signs of worldwide economic downturns have started showing in world's second fastest growing economy India. India's econmy grew at its lowest rate in almost six years in the third quaeter ending at December. The slowdown has raised questions about projected growth for full fiscal year.

Indian economic growth has slowed down drastically to 5.3 percent in the third quarter of fiscal 2008-09 against 8.9 percent in the same period a year ago owing to the cut in demand and exports following the ongoing global economic crisis.

The growth in gross domestic product (GDP) has dipped from 7.6 percent for the second quarter and 7.9 percent for the first quarter, showed statistics released by the Central Statistical Organisation (CSO).

Overall, the growth for the first nine months of the current fiscal has dropped to 6.9 percent, as opposed to the impressive 9 percent economic expansion in the corresponding period last fiscal, the data showed.

The latest growth figures now put a question mark over India being able to log the 7 percent or higher growth in the current fiscal year, as predicted by the government and projected by the central bank.

The lower growth numbers also come as a major shock for the Congress-led United Progressive Alliance (UPA) government which will face national elections soon.

What has come as a major cause for worry is the 2.2 percent decline in farm output and 0.2 percent drop in manufacturing, even as construction logged a much lower growth of 6.7 percent in the quarter under review.

Economic activities that registered reasonable growth in the third quarter were mining (5.3 percent), hospitality, transport and communications (6.8 percent), banking, insurance and realty (9.5 percent) and government services (17.3 percent).

"One of the reasons for the decline is the slide in agriculture. A negative 2.2 percent does have an impact," said D.K. Joshi, the principal economist with the rating agency Credit Rating Information Services of India Ltd (Crisil).