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India's economic growth slows

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India's economic growth slows

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India’s economy expanded by 7.7 percent between April and June,compared with the same period a year earlier, the weakest pace in 18 months.

However that was better than predicted, reinforcing expectations that India’s central bank will keep raising interest rates to put a lid on inflation which remains above nine percent.

“The latest growth number reinforces the view that although growth is slowing down, it is not collapsing as feared by some,” said Ashutosh Datar, economist at IIFL in Mumbai. He believes another 0.25 percent increase at the central bank’s next policy review on September 16 is likely.

India’s economy grew 7.8 percent in the previous quarter.

The Reserve Bank of India’s 11 interest rate hikes since March 2010, including a sharper-than-expected 0.5 percent increase last month, have failed to bring inflation under control. They have though undermined sentiment and demand in an economy that grew at 8.5 percent in the fiscal year that ended in March.

India’s slowing growth is the latest sign of cooling in the big emerging BRIC economies. Brazil’s economic activity fell in June from a month earlier, the first such drop since late 2008, while China posted slower growth in its June quarter.

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