The rapid pace of growth for the economy of India slowed during the first three months of the year as the central bank tightens fiscal policy to contain inflation, according to The Daily Telegraph. On Tuesday, the government of India published growth data for the first quarter that showed a 7.8% expansion in gross domestic product from the same time one year earlier, which was down from an 8.3% expansion of gross domestic product in the year to the fourth quarter of 2010. For the fiscal year 2010/11, the country saw 8.5% growth, which was just below the 8.6% forecast from the government.
The Reserve Bank of India has increased its policy rate by 2.5% over nine separate moves since March 2010 as high inflation persists, and analysts are expecting to see an increase of 75 additional basis points before the end of the year. Jonathan Cavenagh put the figures in perspective, “Not a disaster, but adds to the idea that emerging market growth is cooling as tighter policy kicks in.” He continued to say that there is “more work to be done by the RBI” in the coming months, and a 25 basis point increase is expected at the next policy review on Jun. 16.
