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India’s economic growth slows to 5.3 percent

Asia’s third-largest economy grew 7.6 percent in the July-September quarter but slowed as the U.S. financial crisis erupted, dragging on global growth as Western consumer demand waned and companies cut costs.

Agriculture was the worst hit in the October-December quarter, falling by 2.2 percent, the government statement said. Manufacturing contracted 0.2 percent compared to a growth of 5 percent in the previous quarter.

Earlier this month, the government had said India’s gross domestic product will likely grow 7.1 percent for the fiscal year through March, down from 9 percent the previous year. If that projection proves accurate, it would be the slowest annual growth since 2003.

Some private sector economists have predicted that the global downturn will hit India even harder. Citigroup expects India’s GDP to grow 6.8 percent this fiscal year and 5.5 percent next. Goldman Sachs forecasts growth of 6.7 percent this fiscal year and 5.8 percent next.

Also Friday, the Indian rupee fell to a new low of 50.69 against the dollar, Press Trust of India reported, saying that continued capital outflow by foreign funds and increased dollar demand from importers pushed the currency lower.

The weak growth numbers “highlight our concerns on the economy,” said Chandrajit Banerjee, Director General of the Confederation of Indian Industry, or CII, a leading business group.

“CII has been concerned about the sudden downturn in the economy and has made several recommendations for revival,” including cutting interest rates further and the implementation of infrastructure projects, Banerjee said in the statement.

Since December, India has announced two fiscal stimulus programs, cutting taxes and promising to spend $4 billion - small by global standards - to support growth.

The Reserve Bank Of India has also slashed interest rates in an effort to shore up flagging economic growth. Since October, the bank has cut the repo rate - at which the central bank makes short-term loans to commercial banks - from 9 to 5.5 percent, and the reverse repo - the rate at which it borrows from commercial banks - rate from 6 to 4 percent, both historic lows.