New Delhi: India’s economic growth slowed to 6.9% in the second quarter from 8.4% in the year earlier.
During the July-September quarter, manufacturing growth slumped to 2.7% while mining production contracted by 2.9%. The construction sector improved its performance to 4.3% from 1.2%. While the agriculture sector grew 3.2%, electricity rose 9.8%.
In services, trade, hotel and transportation grew at 9.9%, while financing and insurance rose 10.5%.
Gross domestic product growth fell to 6.9% in the second quarter of the financial year, slipping below 8% for the third straight quarter. The GDP figure was in line with the median forecast in a Reuters poll for an annual rise of 6.9%, and compares with 7.7% growth in the previous quarter.
The $1.6 trillion economy, with a population of 1.2 billion, has been hit by a confluence of factors. Inflation has been persistently high all year, policy inertia has hurt spending and industrial output and, now, capital outflows have pushed the rupee to new lows.
Thirteen interest rate increases have failed to arrest inflation, which is close to double-digits.
While the Reserve Bank of India (RBI) has indicated the low possibility of another rate increase, some market experts say they won’t be surprised if there is another tightening in mid-December. The Indian economy grew at 8.5% in 2010-11.
“It’s more or less in line with our expectations, and we’re expecting it to stay around this level of 7% for the remaining quarters of this financial year,” said Indranil Sengupta, an economist at the Bank of America-Merril Lynch in Mumbai.
The manufacturing sector, which contributes nearly 16% of the country’s GDP, grew at 2.7% in the September quarter, data showed. This compares with 7.8% a year ago, and 7.2% in the previous quarter.
Farm output rose an annual 3.2% for the same period, down from its previous quarter’s 3.9% growth .
Indian companies, particularly in the auto and real estate sector, have been hit by rising input costs and slowdown in demand.
Growth has been slowing across Asia owing to the slump in demand from stalling developed economies for the region’s exports. India’s slowdown has been domestically led and sharp, estimates having fallen from expectations of a 9% pace at the start of the year.
China’s economy slowed down to 9.1% in the third quarter, from a 9.5% in the second quarter, while the Organisation for Economic Cooperation and Development Bank cut its forecasts for the global economy to 3.4% for 2012.
The global economic recovery is running out of steam, leaving the euro zone stuck in a mild recession and the United States at risk of following suit, the OECD said on Monday, sharply cutting its forecasts.
India’s benchmark 10-year federal bond yield eased briefly to 8.76% after the data , while stocks were trading down 0.4%, trimming their fall from 0.7 before the data.
Reuters also contributed to this story