Growth dips as interest rates hit investment
August 30, 2008 – 11:38 amInterest rates started affecting the economic growth. India’s economy decelerated to its slowest growth rate in three-and-a-half years in the first quarter, as higher interest rates forced companies to begin easing back on investment.
Government data showed GDP growth dipped to 7.9 per cent year-on-year in the three months to the end of June. The slowdown came as the central bank, the Reserve Bank of India, warned in its 2007-08 report that it was still worried about inflation.
According to experts increase in interest rates is reason for slowdown in corporate investment plans. That’s not going to change until we see a meaningful decline in interest rates. Economists expect India to continue to lose steam in the coming months as it struggles to contain inflation that has tripled this year to 13-year highs of 12.4 per cent in mid-August.
World Bank estimates show that Russia could overtake India this year as the second fastest growing large economy. With ruling Congress party-led coalition is preparing for an election before May next year you can expect no changes in monetary policy and economic slowdown will continue.