NEW DELHI: India's economy grew by 5.3 per cent in the quarter to September, data showed Friday, continuing a slump blamed on falling investment and weak industrial activity.

The figures for the July-September quarter were slightly better than expected by analysts, who had forecast growth in gross domestic product of 5.2 per cent, but were weaker than data for the April-June quarter.

The economy has been hit by high interest rates, Europe's debt crisis which has slowed exports, and sluggish investment caused by domestic and overseas concerns about stagnant policy-making and corruption.

The 5.3 per cent growth in the second financial quarter was down from 6.7 per cent growth in the same period a year ago.

Manufacturing performed the weakest, growing by a scant 0.8 per cent from a year earlier. Services such as hotels and transport grew by 5.5 per cent while financial and property activities jumped by 9.4 per cent.

Analysts say the worse may now be over after a string of pro-market reforms by the left-leaning government since September which are aimed at reviving confidence and boosting growth.

Goldman Sachs this week upgraded Indian shares in anticipation of a pick-up in growth and easing inflation that would give the central bank room to cut borrowing costs and spur the economy.

Goldman Sachs economist Tushar Poddar said he saw “an improving outlook” with growth climbing to 7.2 per cent in 2014 from 5.4 per cent in 2012.

He cited falling oil prices, growing domestic demand as incomes rise and economic reforms that could ease supply and infrastructure bottlenecks.

The Congress-led government agreed on Thursday to a vote in parliament on the contentious issue of allowing supermarket foreign giants like Walmart to operate in India, a move that critics fear could close many small family-run stores.

The government's decision was an attempt to end a parliamentary stalemate and press ahead with its reform agenda that includes opening up the vast pensions and insurance sectors to greater investment from overseas.

The government is expected to win the vote on retail policy next week comfortably in the lower house but may face a tougher fight in the upper house.

While defeat would be a loss of face for the government, it would not be a vote of confidence and so would not lead to early elections.

“GDP growth this (fiscal) year will probably fall a little bit below 5.5 per cent or thereabouts and it will start recovering in the fiscal year 2014,”Atsi Sheth, senior analyst at global ratings agency Moody's, told the Economic Times.

While growth of above 5.0 per cent would be the envy of much of the world, it is not enough for India which has been aiming for close to double-digit expansion as it seeks to reduce crushing poverty.

“For us, eight per cent growth is not an aspiration but a necessity. India cannot afford to grow below eight per cent,” Finance Minister P. Chidambaram said.