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GDP figures from the Finance Ministry have shown that India’s economy has grown by 7.7% in the second quarter of this year compared with the same three months in 2010. This is the weakest quarterly growth its economy has seen for the last eighteen months however the result is still better than was anticipated. The rate of growth is predicted to continue to reduce due to increasing interest rates imposed by the banks in order to control inflation.

An economist at IIFL in Mumbai, Ahutosh Datar, has stated that even though India’s economic growth has slowed it is still very positive news that it is still growing and not shrinking as was previously feared.

The Indian Finance Minister, Pranab Mukerjee, has also expressed his optimism over the result saying that although the figures could be better, they were not too disappointing.

Interest rates have been increased by The Reserve Bank of India 11 times in the past seventeen months and they are expected to be increased yet again after a meeting regarding rates due to be held in September. Despite the continuous increases in interest the level of inflation is still way above target. In July inflation was calculated as 9.22%, well over double what the Reserve Bank of India hoped for.

Inflation is a bigger problem for India than for any other big economy and, even though it has been increasing interest rates quicker than any other country, it still remains an issue.

A breakdown of the different economic sectors in India has conveyed that construction is the sector that is struggling the most.

About The Author

Lee Murphy

MAAT and ICPA accountant, with a passion for making accountancy and bookkeeping accessible. Other interests include cloud-based software development for web and mobile access, keeping fit, reading, and entrepreneurship.

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