NEW DELHI: India's economy logged around 5.5 per cent growth in the last financial quarter, the finance minister estimated yesterday, a rate that could boost calls for lower interest rates to spur activity.
The once-booming economy has been hit by high interest rates, Europe's debt crisis that has slowed exports and sluggish investment caused by domestic and overseas concerns about policy and corruption.
P Chidambaram said he expected official data to be released on Friday to show "around 5.5pc" growth in three months to September - down from 6.9pc in the same period a year earlier.
"We face a difficult situation. The global economy is still in crisis," he said.
The economy was growing by more than 8pc before 2011-12, but has been performing increasingly worse with the Congress-led government of Prime Minister Dr Manmohan Singh criticised for its handling of the situation.
Even though 5.5pc growth will be the envy of much of the world, it is not enough for India aiming for close to double-digit expansion to substantially reduce crushing poverty.
"For us, 8pc growth is not an aspiration but a necessity. India cannot afford to grow below it," he said.
The slow growth comes at a time when it is more difficult for the government to pep up the economy than in the 2008-09 crisis. Then, it had more fiscal room to stimulate the economy but now it is struggling to cut a widening budget deficit and avert a downgrade of its sovereign debt to "junk" status by global credit ratings agencies.
The central bank has been keeping interest rates high to combat inflation, which eased marginally in October to 7.45pc year-on-year. Economists say it is still too high to lower rates.