India's Economic Growth Slows As Rising Prices Hurt
BBC NEWS, BUSINESS
May 31, 2011: India has reported weaker-than-expected growth numbers for the first three months of the year. The country's economy grew by 7.8% in the first quarter compared with the same period last year, the latest government figures showed. For the full year to March the economy grew by 8.5%, lower than government's forecast of 8.6%
India is one of the fastest growing economies in the world but has been hit hard by rising consumer prices. Analysts say a surge in prices of essential commodities coupled with measures to cool the economy have started to take a toll on growth.
"Raging inflation and a gradual increase in borrowing costs has dampened domestic demand, alongside lackluster investment sentiment," said Radhika Rao of Forecast Pte.
The central bank has increased interest rates nine times in 15 months. The last rise on 3 May boosted the benchmark interest rate by 50 basis points to 7.25%. "We have a situation where inflation is uncomfortably high, so the authorities are tackling it by raising interest rates," said Justin Wood of the Economist Corporate Network. "Obviously this tightening environment has been slowing things down." he added.