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April 15, 2007
GDP growth may dip to 8.5 percent: CII

New Delhi,
Moderate growth, inflation, surging interest rates and supply shortage will together pull down India's GDP growth rate to 8.5 percent in 2007-08, halting the economy's march to a double-digit growth, says a leading industry body.

The economy witnessed some very tough times in the fag end of the fiscal 2006-07 and that has slowed down the growth drastically, the Confederation of Indian Industry (CII) said Sunday.

While the agricultural sector has grown from 2.7 to 3 percent, the moderation in growth is primarily due to unexpected monetary measures by the Reserve Bank of India (RBI) to harness inflation, which dropped down to 5.74 percent at the end of 2006-07, it said.

"These across-the-board rate hikes yield results with a lag and therefore CII feels that the effects would be felt well into the new fiscal," it said in a statement.

The inflation has been caused largely due to constraints on the supply side, which could have been reined in with modest measures, the body said.

The sectors that have been affected the most as a result of this slowdown are the auto industry, retail and banking among others.

"The growth of industry and services are likely to suffer slowdowns to 9.3 percent and 9.9 percent in the current year compared with the corresponding values of 10 percent and 11.2 percent last year."

Another sector which will be affected the most due to tightening of money is exports, which has been one the major sectors to boost GDP growth.

IANS | April 15, 2007

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