India's economic growth slowed to an annual rate of 7.8% in its fiscal final quarter as an aggressive series of interest rate hikes hit activity, according to official data today.
The January-March figure was down nearly a percentage point from 8.6% logged in the same period last year and was also off the 8.3% expansion in the third quarter.
The Indian central bank has raised interest rates nine times in the past 15 months to curb stubbornly high inflation, which is running at 8.6% and has caused huge hardship to the country's hundreds of millions of poor.
The quarterly performance was below market consensus expectations that Asia's third-largest economy would grow 8.2% and was well below rival emerging market giant China's 9.7% expansion.
However, for the full year India's Central Statistical Organisation said the economy grew 8.5%, well up from the 7.4% of 2009-2010.
Controlling inflation which has been uncomfortably high for over a year is an overriding priority for the Congress-led government, with poorer households - the backbone of its support - especially hard-hit by rising food and fuel costs.
During the quarter ending March 31, growth in the manufacturing sector slowed to 5.5% from 15.2% in the same quarter of the previous year. The service sector, which now accounts for more than half of India's gross domestic product, was up 8.7% in the quarter, the weakest showing since October-December 2004, economists said.
Indian Prime Minister Manmohan Singh warned at the weekend the country's growth in 2011-12 would likely miss the government's 9% target as rising commodity prices, especially oil, and stubborn inflation slow activity. India's central bank earlier this month lowered its growth projection to 8%.
The weaker quarterly performance comes as the government has been struggling to attain double-digit growth to overcome crushing poverty in the nation of 1.2 billion people.
High growth is essential to fund social projects such as the proposed Right to Food Act to feed India's poverty-stricken millions, government leaders say. But the central bank has said short-term economic growth may have to be sacrificed in the fight against inflation.
