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GDP growth down, Manmohan says 'important challenges' ahead

business Updated: Aug 30, 2013 20:02 IST
HT Correspondent
HT Correspondent
Hindustan Times
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India's economic growth slumped to 4.4% in the first quarter of this fiscal on the back of a contraction in manufacturing output that more than offset relatively robust growth in services, government data showed on Friday.

The manufacturing sector contracted 1.2% in the January-March Period, while agriculture sector expanded 2.7%. Among services, financial services grew 8.9%, while trade and transportation expanded at a moderate pace of 6.1%, according to the data released by the Central Statistical Organisation (CSO) -- the government's main data arm.

Low business confidence, slumping investment, high inflation and weak export demand from Western countries were blamed for the bleak performance which comes amid a heightened volatility in currency and stock markets.

Despite government efforts to talk up the economy after a burst of pro-market reforms earlier, most independent analysts see continuing slack demand and few quick fixes.

"The GDP figures for first quarter clearly show that the economy continues to be in the throes of a slowdown. The concern becomes more acute when we see that at the present moment, there are no clear indications that the economy has bottomed out," said Chandrajit Banerjee, director general, Confederation of Indian Industry.

"The economy needs the undivided attention of policy makers," he said.

Prime Minister Manmohan Singh, who was speaking in Parliament before the GDP data were announced, said the rupee's worst slide against the dollar in nearly two decades "certainly a shock".

But there is "no reason for anybody to believe we are going down the hill and 1991 is on the horizon," Singh told lawmakers. In 1991, a foreign-exchange strapped government pawned its gold reserves in exchange for loans from the International Monetary Fund.

Singh called India's record current account deficit - the widest measure of trade that has undermined the currency - "unsustainably large".

But actions by policymakers' including restricting currency outflows and reducing gold imports to narrow the trade gap would bear fruit, he said. India is faced "with important challenges but we have the capacity to address them - it is at times like these a nation shows what is truly capable of," he said.

(With inputs from agencies)