Growth slows to almost 7.8%

As you all know the high level of inflation is a worrying factor.India’s growth in January-March at 7.8 per cent was the slowest in five quarters as rising prices and interest rates crimped consumption and investment. For the whole of 2010-11, the economy expanded 8.5 per cent, a shade below the finance ministry’s forecast of 8.6 per cent growth. Consumer demand has been slowing down with inflation running at over 8 per cent over the last 16 months, admit finance ministry officials. Car sales, for instance, rose just 13 per cent in April, the slowest since June 2009. India’s inflation rate, fuelled by rising food and commodity prices, is the highest after Russia among the emerging economies. The Reserve Bank of India has been trying to cool down prices by raising key policy interest rates, which sucks excess money out of the system. “The RBI will need to raise interest rates further to rein in inflation. There should actually be simultaneous fiscal and monetary measures,” said N.R. Bhanumurthy of the National Institute of Public Finance and Policy. So it now need of the hour to rein in inflation and predicted that the RBI could raise interest rates by a quarter to half per cent shortly. However, this could curb investments too!!!