May 31, 2008	Saturday	Jamadi-ul-Awwal 25, 1429

NEW DELHI, May 30: India’s economy grew nine per cent in the last fiscal year, second only to China among big economies, but the better than expected figure was overshadowed by a surge in inflation, data showed on Friday.

Growth to March 2008 was down from the previous year’s 9.6 per cent but still marked the third straight year the economy expanded by nine per cent or more despite aggressive monetary tightening to tame price rises.

Annual growth was 8.8 per cent in the fourth quarter to March, underpinned by strong construction and investment. But interest rates at six-year highs dented manufacturing growth, which virtually halved to 5.8 per cent.

The fourth-quarter figure was far better than market expectations of 8.1 per cent and full-year growth, although the lowest in three years, beat a government estimate of 8.7 per cent.“India has clearly shifted to a different growth trajectory as can be seen by macroeconomic fundamentals such as investment activity and rising disposable incomes,” said Shubhada Rao, chief economist at Mumbai’s Yes Bank.

Rao and other economists, however, still expected growth to slow this year as high borrowing costs and tough global financial conditions bite, with some forecasting expansion as low as seven per cent.

Finance Minister Palaniappan Chidambaram predicted growth of 8.5 per cent.

Meanwhile, last year’s strong growth numbers were offset by concern over inflation, which rose to a near four-year high of 8.1 per cent for the week ended May 17 from 7.82 per cent a week earlier.

Inflation, which has doubled in four months, is of acute concern to the Congress-led government as it faces national elections by May 2009 and fears a voter backlash over prices.

Chidambaram called the price rise “worrisome” and pledged the government “will do our best to contain, moderate and reverse” inflation.

But he said the administration, which has already introduced a slew of fiscal measures to try to check inflation such as banning exports of key commodities like rice, had no “instant answers.”

Economists forecast inflation would push even higher if the government goes ahead with an expected rise in state-set fuel prices to stem huge losses at public sector oil firms after the global surge in crude prices.—AFP