Indian growth weakest in 9 years, rupee slides

Thu May 31, 2012 8:04am EDT
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By Manoj Kumar

NEW DELHI (Reuters) - India's economic growth slumped to its lowest level in nine years in the first three months of 2012, marking a dramatic slide in the fortunes of a country whose economy was boasting nearly double-digit growth before the global recession.

"Urgent and bold steps are immediately needed to prevent the economy from descending into a full blown crisis. This must be averted at all costs," said Rajiv Kumar, secretary-general of the Federation of Indian Chambers of Commerce and Industry.

The economy grew 5.3 percent in the last quarter from a year earlier, a sharp slowdown from 9.2 percent growth in the last quarter of the previous year, government data showed. Finance Minister Pranab Mukherjee blamed the poor performance of the manufacturing sector, which shrank 0.3 percent from a year earlier, for the slowdown.

The data was released as the rupee plunged to yet another record low and protesters took to the streets across India to demand the scrapping of a steep petrol price hike announced last week.

The figures were the latest confirmation that the slowdown of Asia's third-biggest economy is deepening.

"This is definitely a very important signal for the government - this is a make or break situation for India and the government has to step on the panic button," said Rupa Rege Nitsure, chief economist at Bank of Baroda in Mumbai.

"If the government doesn't step in now, India's sovereign ratings may be jeopardized."

Prime Minister Manmohan Singh's government largely blames factors beyond its control, such as the euro zone debt crisis, for its economic woes.   Continued...

Workers walk in front of a multi-story commercial building under construction on the outskirts of the western Indian city of Ahmedabad May 31, 2012. REUTERS/Amit Dave