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India growth seen slowing again in March quarter

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Pronab Sen said Asia's third-largest economy probably grew in India's fiscal fourth-quarter around 8.2 per cent from a year earlier. That would mark the third straight quarterly slowdown in annual economic growth.

Growth picked up in the April-June quarter of 2007 to 9.3 per cent, but then slowed to 8.9 per cent for July-September and 8.4 per cent for October-December.

"I would suspect it would be somewhat lower than that, probably around 8.2 or thereabouts (in the March quarter)," Sen, secretary ministry of statistics and programme implementation, said.

He said the economy would probably grow more or less 8.7 per cent in the fiscal year to March 31, but the outlook for the following year was hard to judge due to uncertainty in the global economy.

"We are converging on to a trend which is somewhere in the 8.0 to 8.5 percent region," Sen said.

"We've run above that for a while, essentially driven by past excess capacities and very, very strong investment performance, but now everything seems to be settling down."

India's growth rate has eased from above 9 percent in 2006-07. The statistics office will release data for the March quarter in May.

Full-year gross domestic product increases have been revised higher in recent years, with the 2006/07 rate lifted to 9.6 per cent from an initial reading of 9.4 per cent.

Sen said experience showed that when the economy was on an accelerating trend the revisions tended to raise the growth rate from the earlier estimates.

"But if there's a mild deceleration or any deceleration going on, then the revisions are usually a little lower. So whether we get 8.7, I can't say for certain, but it would be around that somewhere, give or take 0.2 percentage points," he said.

Industrial output also indicated an overall slowdown.

"We are no longer in that 10.5-11.5 per cent range that we had last year," he said, adding the range was now more like 7.5-9.5 per cent annual growth for industrial production.

"But that's a part, as we said, of really converging to the trend."

Tricky Year Ahead

The outlook for 2008-09, beginning on April 1, was tricky to determine because much would depend on what happened to the global economy. Economists expect global growth to slow this year from the impact of the US housing downturn and credit crisis.

"We don't know the magnitude of the global economic slowdown," he said.

India might not be as affected directly by a slowdown in the US economy as some east Asian and European countries, but it would feel an impact.

"It would probably happen a little later here than it would happen in other countries, but that doesn't mean that we're immune," he said.

The government unveiled its 2008-09 Budget at the end of February, proposing cuts in taxes and duties as well as raising the threshold for taxable income.

"Now hopefully with this Budget, which is by and large an expansionary Budget, the outlook looks a little bit more propitious than it did before the Budget," Sen said.

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