The Indian economy probably grew last quarter at the slowest pace this year after the central bank raised interest rates to a five-year high to curb inflationary pressure.
Asia’s third largest economy expanded 8.7% in the three months to 30 September, from a year earlier—less than the 9.3% gain in the previous quarter, according to the median forecast of 19 analysts in a Bloomberg survey.
The figures are due to be released on Friday in New Delhi. The Reserve Bank of India may be near the end of its round of rate increases as inflation is within its target.
India is still the second fastest expanding major economy after China and is attracting investment from Coca-Cola Co., Motorola Inc. and Metro AG, which are among 100 or so companies attending a business conference in New Delhi over the weekend.
“India’s growth is mainly dragged down by manufacturing, constrained by past interest rates rises,” said Sonal Varma, an economist at Lehman Brothers Securities Ltd in Mumbai. “The pace is still fairly fast, and the biggest attraction about India is that it’s among the least vulnerable in Asia to a global economic slowdown.”
With exports accounting for only 23% of India’s $906 billion (Rs 36.06 trillion) economy, Lehman expects the South Asian nation to be relatively immune to a deceleration in world growth sparked by mortgage defaults in the US.
India’s economy has averaged 8.6% growth in the past four years.
Lehman forecasts an expansion of 9% in 2008.
“The optimistic thing about India is that a lot of growth is attributable to domesticconsumption,” said Howard Davies, director of theLondon School of Economics and a former chairman of the UK’s Financial Services Authority. “There is an internal growth dynamic, which Isense is stronger than ever before.”