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NEW DELHI : India's economy is projected to grow 8 per cent this year, slower than last year's 9.1 per cent, according to figures released on Thursday.
The slowdown comes amidst rising inflation of almost 13 per cent, giving business leaders little to cheer.
It has been a bountiful season this year, which traditionally should have meant higher agricultural growth and an upward trend in the economy. But the downbeat data coming out of industry has fed pessimism.
Industrial output increased by just 5.4 per cent in June, a sharp fall from 8.9 per cent the previous year.
Car sales dipped by 17 per cent in July over the same month last year, and air travel fell by 14 per cent between June and July.
The power sector grew by a mere 2.6 per cent in June this year compared to 6.8 per cent in 2007. As power is a core sector, the effect will be felt on the whole economy.
Siddharth Kuvwawala, stock market analyst, said: "The outgoing (investment of India) is more than the incoming investment. Now the government is also trying to elaborate or make some norms lucrative for foreign investors. But it seems like that it is not attracting them (on a large scale)."
After a bull run of several years, the Indian stock market has tumbled and is being listed as one of the worst large emerging market performers this year.
An indication of the crisis has been the fact that overseas funds had sold Indian stocks worth some US$6.52 billion this year. During the same period last year, they had bought a net US$9.6 billion worth of stocks.
All this will certainly result in a backlash in the general elections, which are about six months away.
Prime Minister Manmohan Singh, who is an economist himself, is trying to put back some shine in the economy by hastening economic reforms, now that he does not have the communist parties in his government stopping him.
Prem Shankar Jha, political analyst, said: "There is absolutely nothing you can do (to curb inflation in India). What this government has not been able to do is to promote itself. What it has not been able to tell you is that they have prevented inflation from being worse by taking quick steps. Inflation is now ravaging even America..."
Negative ratings by global agencies have debunked the opinion that India would escape the ravages of the international financial upheaval because its economy is largely domestically driven.
Business sentiments can be perked up only if the economic reform process is given a renewed lease of life. But the government is occupied in combating terror threats by radical Islamic outfits and a resurgent separatist movement in Kashmir. - CNA/ms
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