India's economy will slow this fiscal year, pulled down by lower demand for the nation's exports as the world economy slumps, the central bank's deputy governor, YV Reddy, said.
The economy of the world's second most-populous nation will probably grow 5 percent in the year ending March 31, Reddy said.
That compares with growth of 5.2 percent last year and an earlier central bank estimate of between 5 percent and 6 percent growth.
"The growth rate is less than what we thought it would be, but it is nothing to be ashamed of," Reddy told Bloomberg News in an interview. "There has been a downward estimate in the world economic outlook. In our own country there has been some amount of slowdown, particularly in the manufacturing sector."
Growth will fall short of the 8 percent rate the government says is needed to end poverty in a decade and double per capita gross domestic product, now about US$450. Still, rising borrowing by companies and higher farm production suggest that the economy may pick up next fiscal year, Reddy said.
``There are some signs of a possible improvement in the growth rate, but they are still very tentative,'' he said.
India's farms, which provide a livelihood for three-fifths of its 1 billion people, are emerging from a two-year drought that depressed rural incomes and demand for consumer goods. Monthly industrial growth has averaged 2.2 percent this fiscal year, compared with average growth of 5.2 percent last year.
"Apart from soft demand for some of the goods, prospects of the agricultural sector seem to be better," Reddy said. "Credit off-take in the recent fortnight or two to the commercial sector is looking up."
RSS